Letter of Offer Dated July 16, 2014 For Eligible Equity Shareholders only THE INDIAN HOTELS COMPANY LIMITED The Indian Hotels Company Limited was incorporated on April 1, 1902 in the Republic of India as a public limited company under the Indian Companies Act of 1882. Registered Office and Corporate Office: Mandlik House, Mandlik Road, Mumbai 400 001 Contact Person: Beejal Desai, Vice-President - Legal and Company Secretary and Compliance Officer Tel: (91 22) 6665 3238; Fax: (91 22) 2202 7442; E-mail: [email protected]; Website: www.tajhotels.com Corporate Identity Number: L74999MH1902PLC000183 PROMOTER OF THE COMPANY: TATA SONS LIMITED FOR PRIVATE CIRCULATION TO THE ELIGIBLE EQUITY SHAREHOLDERS OF THE INDIAN HOTELS COMPANY LIMITED (THE “COMPANY” OR THE “ISSUER”) ONLY ISSUE OF UPTO 18,18,18,181 COMPULSORILY CONVERTIBLE DEBENTURES OF FACE VALUE OF ` 55 EACH OF THE COMPANY (THE “CCDs”) FOR CASH AT A PRICE OF ` 55 PER CCD CONVERTIBLE INTO UPTO 18,18,18,181 EQUITY SHARE OF FACE VALUE OF ` 1 EACH OF THE COMPANY (THE “EQUITY SHARES”) AT A PREMIUM OF ` 54 EACH AGGREGATING UPTO ` 1,000.00 CRORES ON A RIGHTS BASIS TO THE ELIGIBLE EQUITY SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 9 CCDS FOR EVERY 40 FULLY PAID-UP EQUITY SHARES HELD BY THE ELIGIBLE EQUITY SHAREHOLDERS ON THE RECORD DATE, THAT IS ON JULY 21, 2014 (THE “ISSUE”). FOR FURTHER DETAILS, SEE SECTION “TERMS OF THE ISSUE” BEGINNING ON PAGE 223. GENERAL RISKS Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in the Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an investment decision in the Issue. For taking an investment decision, investors must rely on their own examination of the Company and the Issue including the risks involved. The securities being offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this Letter of Offer. Investors are advised to refer to section “Risk Factors” beginning on page 15 before making an investment in this Issue. ISSUER’S ABSOLUTE RESPONSIBILITY The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Company and the Issue, which is material in the context of the Issue, that the information contained in this Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect. CREDIT RATING The issue of CCDs has been rated by Credit Analysis & Research Ltd. as CARE AA+ indicating high degree of safety regarding timely servicing of financial obligations. For details, see section “General Information” on page 45 and Annexure. LISTING The existing Equity Shares of the Company are listed on the BSE Limited (“BSE”) and The National Stock Exchange of India Limited (“NSE”) (collectively, the “Stock Exchanges”). The Company has received “in-principle” approvals from the BSE and the NSE for listing the CCDs to be allotted pursuant to the Issue vide their letters dated April 30, 2014 and April 29, 2014, respectively. For the purposes of the Issue, the Designated Stock Exchange is the BSE. LEAD MANAGERS TO THE ISSUE REGISTRAR TO THE ISSUE JM Financial Institutional Securities Limited 7 th Floor, Cnergy Appasaheb Marathe Marg Prabhadevi Mumbai 400 025 Tel: (91 22) 6630 3030 Fax: (91 22) 6630 3330 E-mail: [email protected]Investor Grievance E-mail: [email protected]Website: www.jmfl.com Contact Person: Lakshmi Lakshmanan SEBI Registration Number: INM000010361 Corporate Identity Number: U65192MH1995PLC092522 DSP Merrill Lynch Limited 8 th Floor, Mafatlal Center Nariman Point Mumbai 400 021 Tel: (91 22) 6632 8000 Fax: (91 22) 2204 8518 E-mail: [email protected]Investor Grievance E-Mail: dg.india_merchantbanking@ba ml.com Website: www.dspml.com Contact Person: Vikram Khaitan SEBI Registration Number: INM000011625 Corporate Identity Number: U74140MH1975PLC018618 SBI Capital Markets Limited 202, Maker Tower 'E' Cuffe Parade Mumbai 400 005 Tel: (91 22) 2217 8300 Fax: (91 22) 2218 8332 E-mail: [email protected]Investor Grievance E-Mail: [email protected]Website: www.sbicaps.com Contact Person: Nithin Kanuganti/ Kavita Tanwani SEBI Registration Number: INM000003531 Corporate Identity Number: U99999MH1986PLC040298 Standard Chartered Securities (India) Limited 2 nd Floor, 23-25 M.G. Road, Fort Mumbai 400 001 Tel: (91 22) 4205 6119 Fax: (91 22) 4205 5999 E-mail: [email protected]Investor Grievance E-Mail: [email protected]Website: www. standardcharteredsecurities. co.in Contact Person: Nikhil Tulsyan SEBI Registration Number: INM000011542* Corporate Identity Number: U65990MH1994PLC079263 Link Intime India Private Limited C-13, Pannalal Silk Mills Compound, L.B.S. Marg Bhandup (West) Mumbai 400 078 Tel: (91) 22 2596 7878 Fax: (91) 22 2596 0329 E-mail: [email protected]Investor Grievance E-Mail: [email protected]Website: www.linkintime.co.in Contact Person: Pravin Kasare SEBI Registration Number: INR000004058 Corporate Identity Number: U67190MH1999PTC118368 ISSUE PROGRAMME ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT APPLICATION FORMS ISSUE CLOSES ON AUGUST 4, 2014 AUGUST 11, 2014 AUGUST 20, 2014 * Standard Chartered Securities (India) Limited has obtained a certificate of registration as a Merchant Banker - Category I from SEBI which is valid till August 3, 2014. It has made an application dated April 28, 2014 to SEBI for grant of a certificate of permanent registration in accordance with the Securities and Exchange Board of India (Merchant Bankers) Regulations, 1992, as amended. The certificate of permanent registration from SEBI is awaited.
Transcript
Letter of Offer Dated July 16, 2014
For Eligible Equity Shareholders only
THE INDIAN HOTELS COMPANY LIMITED The Indian Hotels Company Limited was incorporated on April 1, 1902 in the Republic of India as a public limited company under the
Indian Companies Act of 1882.
Registered Office and Corporate Office: Mandlik House, Mandlik Road, Mumbai 400 001 Contact Person: Beejal Desai, Vice-President - Legal and Company Secretary and Compliance Officer
FOR PRIVATE CIRCULATION TO THE ELIGIBLE EQUITY SHAREHOLDERS OF
THE INDIAN HOTELS COMPANY LIMITED (THE “COMPANY” OR THE “ISSUER”) ONLY
ISSUE OF UPTO 18,18,18,181 COMPULSORILY CONVERTIBLE DEBENTURES OF FACE VALUE OF ` 55 EACH OF
THE COMPANY (THE “CCDs”) FOR CASH AT A PRICE OF ` 55 PER CCD CONVERTIBLE INTO UPTO 18,18,18,181
EQUITY SHARE OF FACE VALUE OF ` 1 EACH OF THE COMPANY (THE “EQUITY SHARES”) AT A PREMIUM OF `
54 EACH AGGREGATING UPTO ` 1,000.00 CRORES ON A RIGHTS BASIS TO THE ELIGIBLE EQUITY
SHAREHOLDERS OF THE COMPANY IN THE RATIO OF 9 CCDS FOR EVERY 40 FULLY PAID-UP EQUITY SHARES
HELD BY THE ELIGIBLE EQUITY SHAREHOLDERS ON THE RECORD DATE, THAT IS ON JULY 21, 2014 (THE
“ISSUE”). FOR FURTHER DETAILS, SEE SECTION “TERMS OF THE ISSUE” BEGINNING ON PAGE 223.
GENERAL RISKS
Investment in equity and equity related securities involve a degree of risk and investors should not invest any funds in the Issue unless they can afford to take the risk of losing their investment. Investors are advised to read the risk factors carefully before taking an
investment decision in the Issue. For taking an investment decision, investors must rely on their own examination of the Company and
the Issue including the risks involved. The securities being offered in the Issue have not been recommended or approved by the Securities and Exchange Board of India (“SEBI”) nor does SEBI guarantee the accuracy or adequacy of this Letter of Offer. Investors
are advised to refer to section “Risk Factors” beginning on page 15 before making an investment in this Issue.
ISSUER’S ABSOLUTE RESPONSIBILITY
The Company, having made all reasonable inquiries, accepts responsibility for and confirms that this Letter of Offer contains all information with regard to the Company and the Issue, which is material in the context of the Issue, that the information contained in this
Letter of Offer is true and correct in all material aspects and is not misleading in any material respect, that the opinions and intentions
expressed herein are honestly held and that there are no other facts, the omission of which makes this Letter of Offer as a whole or any such information or the expression of any such opinions or intentions misleading in any material respect.
CREDIT RATING
The issue of CCDs has been rated by Credit Analysis & Research Ltd. as CARE AA+ indicating high degree of safety regarding timely
servicing of financial obligations. For details, see section “General Information” on page 45 and Annexure.
LISTING
The existing Equity Shares of the Company are listed on the BSE Limited (“BSE”) and The National Stock Exchange of India Limited
(“NSE”) (collectively, the “Stock Exchanges”). The Company has received “in-principle” approvals from the BSE and the NSE for
listing the CCDs to be allotted pursuant to the Issue vide their letters dated April 30, 2014 and April 29, 2014, respectively. For the purposes of the Issue, the Designated Stock Exchange is the BSE.
ISSUE OPENS ON LAST DATE FOR REQUEST FOR SPLIT APPLICATION
FORMS
ISSUE CLOSES ON
AUGUST 4, 2014 AUGUST 11, 2014 AUGUST 20, 2014 *Standard Chartered Securities (India) Limited has obtained a certificate of registration as a Merchant Banker - Category I from SEBI which is valid till August 3, 2014. It
has made an application dated April 28, 2014 to SEBI for grant of a certificate of permanent registration in accordance with the Securities and Exchange Board of India
(Merchant Bankers) Regulations, 1992, as amended. The certificate of permanent registration from SEBI is awaited.
SECTION I – GENERAL ...........................................................................................................................................2
DEFINITIONS AND ABBREVIATIONS .............................................................................................................2 NOTICE TO OVERSEAS INVESTORS ............................................................................................................. 10 PRESENTATION OF FINANCIAL INFORMATION...................................................................................... 12 FORWARD LOOKING STATEMENTS ............................................................................................................ 14
THE ISSUE ............................................................................................................................................................ 34 SUMMARY FINANCIAL INFORMATION ...................................................................................................... 36 GENERAL INFORMATION ............................................................................................................................... 42 CAPITAL STRUCTURE ...................................................................................................................................... 47 OBJECTS OF THE ISSUE ................................................................................................................................... 54 TAX BENEFIT STATEMENT ............................................................................................................................ 63
SECTION IV: ABOUT THE COMPANY .............................................................................................................. 75
OUR BUSINESS .................................................................................................................................................... 75 OUR MANAGEMENT ......................................................................................................................................... 85
SECTION V: FINANCIAL INFORMATION ........................................................................................................ 94
FINANCIAL STATEMENTS .............................................................................................................................. 94 WORKING RESULTS ....................................................................................................................................... 198 MATERIAL DEVELOPMENTS ....................................................................................................................... 199 ACCOUNTING RATIOS AND CAPITALISATION STATEMENT ............................................................. 200 STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY ................................................... 201
SECTION VI: LEGAL AND OTHER INFORMATION .................................................................................... 203
OUTSTANDING LITIGATION AND DEFAULTS ......................................................................................... 203 GOVERNMENT AND OTHER APPROVALS ................................................................................................ 211 OTHER REGULATORY AND STATUTORY DISCLOSURES ................................................................... 214
SECTION VII: ISSUE INFORMATION .............................................................................................................. 223
TERMS OF THE ISSUE ..................................................................................................................................... 223
SECTION VIII: OTHER INFORMATION ......................................................................................................... 254
MATERIAL CONTRACTS AND DOCUMENTS FOR INSPECTION ......................................................... 254 DECLARATION ................................................................................................................................................. 256
ANNEXURE
2
SECTION I – GENERAL
DEFINITIONS AND ABBREVIATIONS
Definitions
This Letter of Offer uses certain definitions and abbreviations, which unless the context indicates or implies
otherwise, have the meanings as provided below. Reference to any legislation, act or regulation shall be to such
legislation, act or regulation, as amended from time to time.
Company Related Terms
Term Description
The Company/ the Issuer The Indian Hotels Company Limited, a public limited company incorporated under
the provisions of the Indian Companies Act, 1882 and having its registered office
at Mandlik House, Mandlik Road, Mumbai 400 001
“We”, “Our”, “Us” or
Taj Group
The Indian Hotels Company Limited along with its subsidiaries, jointly controlled
entities and associate companies. For details of the subsidiaries, jointly controlled
entities and associate companies of the Company, see section “Financial
Statements” beginning on page 94
Articles of Association
or Articles
Articles of Association of the Company, as amended
Board of Directors or
Board
Board of directors of the Company
Compulsorily
Convertible Debentures
or CCDs
Compulsorily convertible debentures of face value of ` 55 each of the Company
Company GDRs GDRs outstanding as of the date of this Letter of Offer in relation to 5,195,783
GDRs issued by the Company in 1995
Director(s) Any or all the directors on the Board, as may be appointed from time to time
Equity Shares Equity shares of face value of ` 1 each of the Company
Group Companies Companies, firms, ventures, etc. promoted by the Promoter of the Company,
irrespective of whether such entities which are covered under Section 370(1)(B) of
the Companies Act, 1956 or not
LIBOR London Inter Bank Offered Rate
Memorandum
of Association or
Memorandum
Memorandum of Association of the Company, as amended
Promoter Tata Sons Limited
Promoter Group Promoter group of the Company as determined in terms of Regulation 2(1)(zb) of
‘potential’, ‘project’, ‘pursue’, ‘shall’, ‘should’, ‘will’, ‘would’, or other words or phrases of similar import.
Similarly, statements that describe the strategies, objectives, plans or goals of the Company are also forward-
looking statements. However, these are not the exclusive means of identifying forward-looking statements.
All statements regarding the Company’s expected financial conditions, results of operations, business plans and
prospects are forward-looking statements. These forward-looking statements include statements as to the
Company’s business strategy, planned projects, revenue and profitability (including, without limitation, any
financial or operating projections or forecasts), new business and other matters discussed in this Letter of Offer
that are not historical facts. These forward-looking statements contained in this Letter of Offer (whether made
by the Company or any third party), are predictions and involve known and unknown risks, uncertainties,
assumptions and other factors that may cause the actual results, performance or achievements of the Company to
be materially different from any future results, performance or achievements expressed or implied by such
forward-looking statements or other projections. All forward-looking statements are subject to risks,
uncertainties and assumptions about the Company that could cause actual results to differ materially from those
contemplated by the relevant forward-looking statement. Important factors that could cause actual results to
differ materially from the Company’s expectations include, among others:
Global and domestic economic and business environment;
Seasonality of our business;
Our ability to compete in both domestic and overseas markets;
Our requirements of higher capital expenditure and funding on commercially viable terms;
Effective management of our operational systems, procedures and internal controls;
Changes in the hotel and travel industry both in domestic and overseas markets;
Increase in operating costs due to escalation of labour costs, utility costs, increased taxes and insurance
costs;
Our ability to attract and retain key managerial personnel and qualified employees;
Fluctuations in foreign exchange rates; and
Adverse social, economic or political events in India.
Additional factors that could cause actual results, performance or achievements to differ materially include, but
are not limited to, those discussed in sections “Risk Factors” and “Our Business” beginning on page 15 and page
75 respectively. The forward-looking statements contained in this Letter of Offer are based on the beliefs of
management, as well as the assumptions made by, and information currently available to, management of the
Company. Whilst the Company believes that the expectations reflected in such forward-looking statements are
reasonable at this time, it cannot assure investors that such expectations will prove to be correct. Given these
uncertainties, Investors are cautioned not to place undue reliance on such forward-looking statements. In any
event, these statements speak only as of the date of this Letter of Offer or the respective dates indicated in this
Letter of Offer, and the Company undertakes no obligation to update or revise any of them, whether as a result
of new information, future events or otherwise. If any of these risks and uncertainties materialise, or if any of
the Company’s underlying assumptions prove to be incorrect, the actual results of operations or financial
condition of the Company could differ materially from that described herein as anticipated, believed, estimated
or expected. All subsequent forward-looking statements attributable to the Company are expressly qualified in
their entirety by reference to these cautionary statements.
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SECTION II: RISK FACTORS
The risks described below together with other information contained in this Letter of Offer should be carefully
considered before making an investment decision. The risks described below are not the only ones which are
relevant to the Company, the Taj Group or investments in securities of Indian issuers. Additional risks not
presently known to us or that we currently deem immaterial may also adversely affect our business operations.
Our business, financial condition or results of operations could be materially and adversely affected by any of
these risks.
This Letter of Offer also contains forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those anticipated in these forward-looking statements as a result of certain
factors, including the considerations described below and the section “Forward Looking Statements” on page
14.
Risks specific to our Business
1. Contraction of the global economy or low levels of economic growth in the domestic and overseas
markets where we operate could adversely affect our revenues and profitability as well as limit or slow
our future growth.
We operate in the hotel sector which is sensitive to the changes in the economic conditions. Consumer
demand for our services is closely linked to the performance of the general economy and is sensitive to
business and personal discretionary spending levels. Decreased global or regional demand for hotel
services can be especially pronounced during periods of economic contraction or low levels of economic
growth, and the recovery period in our industry may lag overall economic improvement. Decline in
demand for our products and services due to general economic conditions could negatively impact our
business by decreasing the revenues and profitability of our owned and managed properties, limiting the
amount of fee revenues we are able to generate from our managed properties, and reducing overall
growth of our services. In addition, many of the expenses associated with our business are relatively
fixed and there can be no assurance that we will be able to meaningfully decrease these costs during a
period of overall economic weakness. Further, on account of recent and prolonged slowdown in the
economy, certain of our overseas investments may not have performed as per our expectations.
There can be no assurance that such macroeconomic and other factors which are beyond our control
would not significantly affect demand for products and services in the future, including demand for
rooms at properties that we manage, own, lease or develop, and such factors would not adversely affect
our revenues and profitability as well as limit or slow our future growth.
2. Some of our hotels are maintained under license/lease arrangements with third parties including
governmental bodies. License/lease arrangements are subject to various risks including non-renewal
of the license/lease period or amendment to terms and conditions of the license/lease by our
licensors/lessors which may adversely affect our business.
Some of our hotels including certain of our key hotels are maintained under license/lease arrangements
entered with third parties. Whilst we typically have long term license/lease arrangements, there can be no
assurance that our license/leasehold arrangements will be renewed upon expiry of the license/lease
period. Further, there can be no assurance that these license/lease arrangements will be renewed on the
same terms and conditions or the revised conditions would not be unfavourable to us. We are currently in
a dispute with certain licensors/lessors, which are governmental bodies, for non-renewal of a long term
license/lease and payment of arrears with respect to rent. For details in relation to these disputes, see
section “Outstanding Litigation and Defaults” on pages 207 and 208. Further, for details in relation to our
hotels which are maintained by us on license/lease arrangements, see section “Business” on pages 79 and
80. Non-renewal of license/lease or unfavourable amendment to terms and conditions of license/lease
may adversely affect our business.
3. As a part of our long term strategy, we propose to achieve future expansion largely though operating
and management contracts which may expose us to a variety of risks such as unilateral termination
and non-renewal.
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We intend to achieve future expansion largely though operating and management contracts. Our success
in achieving desired results from the management contracts depends on our ability to establish and
maintain long term and positive relationships with third party property owners and on our ability to
renew existing agreements and entering into new management agreements. Whilst the management
contracts we enter into with the third party owners are typically long term arrangements, it may allow the
hotel owner to terminate the agreement under certain circumstances, including termination in cases of
failure to meet certain financial or performance criteria. Our ability to meet these financial and
performance criteria is subject to, among other things, risks common to the overall hotel industry, which
may be outside our control. Further, at any given time, we may be in disputes with one or more of our
hotel owners in relation to interpretation and compliance with the performance and financial standards.
Any such dispute could be very expensive for us, even if the outcome is ultimately in our favour. We
cannot predict the outcome of any arbitration or litigation, the effect of any negative judgment against us
or the amount of any settlement that we may enter into with any third party. An adverse result in any of
these proceedings could adversely affect our results of operations.
The property owners also create charge or collateral on the hotel property under management for the
purposes of purchasing or refinancing the purchase of the hotel property. If these property owners are
unable to repay or refinance maturing indebtedness on favourable terms or at all, their lenders could
declare a default, accelerate the related debt and repossess the property. Any such re-possessions could
result in the termination of our management agreements or eliminate revenues and cash flows from such
property, which could negatively affect our business and results of operations.
Furthermore, the property owners of managed hotels could depend on financing to buy, develop and
improve hotels and in some cases, fund operations during down cycles. Our hotel owners’ inability to
obtain adequate funding could materially adversely impact the maintenance and improvement plans with
respect to existing hotels, as well as result in the delay or stoppage of the development of existing
pipeline.
If any of these risks materialise, it could adversely affect our business, financial condition and results of
operations.
4. Any deterioration in the quality or reputation of our brands could have an adverse impact on our
reputation, business, financial condition and results of operations.
Our brands and our reputation are among our most important assets. Our ability to attract and retain
guests depends, in part, on the public recognition of our brands and their associated reputation. In
addition, the success of our hotel owners’ businesses and their ability to make payments to us may
indirectly depend on the strength and reputation of our brands. Such dependence makes our business
susceptible to risks regarding brand obsolescence and to reputational damage. If our brands are found to
be lacking in consistency and quality, we may be unable to attract guests to our hotels, and further, we
may be unable to attract or retain our hotel owners.
In addition, there are many factors which can negatively affect the reputation of any of our individual
brands or our overall brand. Occurrence of accidents or injuries, natural disasters, crime, individual guest
notoriety, or similar events can have a substantial negative impact on our reputation, create adverse
publicity and cause a loss of consumer confidence in our business. Due to the broad expanse of our
business and hotel locations, events occurring in one location could have a resulting negative impact on
the reputation and operations of otherwise successful individual locations. In addition, the considerable
expansion in the use of social media over recent years has compounded the potential scope of the
negative publicity that could be generated by such incidents. We could also face legal claims, along with
adverse publicity resulting from such litigation. If the perceived quality of our brands declines, or if our
reputation is damaged, our business, financial condition and results of operations could be adversely
affected.
5. Our business is subject to seasonal and cyclical volatility, which may contribute to fluctuations in our
results of operations and financial condition.
We operate in an industry which is seasonal in nature. The periods during which our hotel properties
experience higher revenues vary from property to property, depending principally upon location and the
customer base served. Accordingly, our revenue in one quarter may not accurately reflect the revenue
17
trend for the complete Financial Year. The seasonal and cyclical volatility has been mitigated to some
degree as business travel, which is less sensitive to seasonal variations than tourist travel, accounts for a
larger share of travel to India and other destinations. The seasonality and cyclicality of our industry may
contribute to fluctuations in our results of operations and financial condition.
6. Increased competition in the hotel sector may adversely affect our operations and there can be no
assurance that the new or existing competitors will not significantly expand or improve facilities in the
markets in which we operate.
Hotels owned, managed or operated by us, compete for guests with other hotels in a highly competitive
industry. The success in hotel industry is largely dependent upon the ability of the hotel operators to
compete in areas such as room rates, quality of accommodation, brand recognition, service level,
convenience of location and the quality and scope of other amenities, including food and beverage
facilities. Hotels compete with existing hotel facilities in their geographic markets, as well as future hotel
facilities that may be developed in proximity to the existing hotels. The hotels owned, managed or
operated by us are generally located in intensely competitive regions. Demographic, geographic or other
changes in one or more of our markets could impact the convenience or desirability of the sites of certain
hotels, which would adversely affect the operations of those hotels.
We also face competition in overseas markets from companies that may have more experience with
operations in those countries or with international operations generally. Further, our competitors may
have more sophisticated distribution and sales channels or through higher expenditures on offline and
online advertising and marketing placements, may be able to attract new customers or our existing
customers.
Additionally, the Indian subcontinent, South East Asia and Asia Pacific with high growth rates have
become the focus area of major international chains. These entrants are expected to intensify the
competitive environment. Furthermore, in the past few years, certain international hotel chains have
established their presence in India, mainly through management and/or marketing arrangements.
With increased international presence and strategy of growing further internationally, we face
competition from hotel facilities in such geographic markets, including major international hotel chains.
The major international hotel chains have some competitive advantages over us due to their global spread
of operations, greater brand recognition and greater marketing and distribution networks. There can be no
assurance that new or existing competitors will not significantly lower rates or offer greater convenience,
services or amenities or significantly expand or improve facilities in a market in which we operate.
7. Our operations may be adversely affected if we are unable to attract and retain qualified employees or
if relations with employees deteriorate.
We operate hotel properties that strive to provide our guests with high levels of service and personal
attention. We, therefore, must maintain a large, well trained service staff to be successful. This requires
us to attract, train and retain employees qualified to provide the standard of service we have become
known for. Due to our high standards of service and extensive training, many of our competitors may
hire members of our staff. Additionally, we face challenges in recruiting suitably qualified staff for our
operations. Shortage of skilled labour could adversely affect our ability to provide these services and
could lead to reduced occupancy or potentially damage our reputation. If we are not able to hire and
retain qualified personnel, our ability to expand our business will be impaired.
Further, our key managerial personnel have, over the years, built relations with customers and other
persons who are connected with us and have assisted us in achieving the desired growth. Our
performance is majorly dependent upon the services of our key managerial personnel. If our key
managerial personnel are unable or unwilling to continue in their present position, we may not be able to
replace them easily or at all. The loss of their services could impair our ability to implement our strategy,
and our business, financial condition, results of operations and prospects may be materially and adversely
affected.
Additionally, whilst we believe we presently share good relations with employees, our relationship with
employees could deteriorate due to disputes related to, among other things, wage or benefit levels. Whilst
we have not recently had any disputes with our employee unions and we believe that our labour relations
18
are good, we cannot assure you that there will not be any employee disputes in the future. A shortage of
skilled labour or stoppage caused by disagreements with employees, strikes or lock-outs could adversely
affect our ability to provide these services and could lead to reduced occupancy or potentially damage
our reputation. Further, we have entered into wage settlement agreements with our employees and if we
are unable to renew these wage settlement agreements or negotiate favourable terms, we could
experience a material adverse effect on our operations.
8. We have certain commitments in relation to a property in Mumbai on which the erstwhile Hotel Sea
Rock stood.
The Company presently holds 19.90% of the equity share capital of Lands End Properties Private
Limited (“LEPPL”). LEPPL, in turn, holds 67.04% interest (through its wholly-owned subsidiary, Sky
Deck Properties & Developers Private Limited (“SDPDPL”) in a property in Mumbai on which Hotel
Sea Rock stood (the “Sea Rock Property”). LEPPL has issued zero coupon non-convertible debentures
aggregating to ` 521.00 crores (the “NCDs”) to certain lenders for which the total loan repayment
obligation would be ` 693.45 crores in February 2016.
The shareholding of LEPPL in SDPDPL has been offered as security in relation to the NCDs to the
lenders. Pursuant to an existing arrangement, the Company has the right to acquire 100% shareholding of
LEPPL in SDPDPL in case of occurrence of certain events, in which case, the Company shall be obliged
to redeem the NCDs held by the lenders at an agreed amount, as applicable, for each pre-payment date on
or before February 2016.
In the event, the Company does not exercise its right of acquiring 100% shareholding of LEPPL in
SDPDPL, either SDPDPL will be required to refinance its entire outstanding debt and if not, the lenders
would be authorised to divest the entire shareholding of SDPDPL placed with them as security. In such
an event, if the amount realised by such a divestment by the lenders is lower than the redemption amount
as due, the Company will be under an obligation to compensate the lenders for the shortfall. For further
details, see “Financial Statements – Audited Standalone Financial Statements as at and for the year ended
March 31, 2014 - Note 32” and “Financial Statements – Audited Consolidated Financial Statements as at
and for the year ended March 31, 2014 - Note 33” on pages 129 and 180 respectively.
In addition, SDPDPL has availed of a secured zero coupon term loan of ` 508.00 crores from a financial
institution for which the total repayment obligation on the maturity date (being January 2016) would be `
708.93 crores. This term loan has been secured by way of a pledge on all direct and indirect shareholding
of ELEL.
In effect, the total repayment obligation for LEPPL on a consolidated basis aggregates ` 1,402.38 crores
covering the current outstanding debt obligations of LEPPL and SDPDPL, its underlying subsidiary.
In addition to the above commitment, certain shareholders of ELEL Hotels and Investments Limited
(“ELEL”) (a company which holds the lease for the Sea Rock Property) have an option to sell 526,854
shares of ELEL at a pre-determined price to the Company on July 1, 2014 upon fulfilment of certain
conditions. The requirement of fulfilment of the Company’s financial commitments with respect to the
Sea Rock Property as mentioned above may adversely affect the Company’s results of operations. For
further details, see “Financial Statements – Audited Standalone Financial Statements as at and for the
year ended March 31, 2014 - Note 32” and “Financial Statements – Audited Consolidated Financial
Statements as at and for the year ended March 31, 2014 - Note 33” on pages 129 and 180 respectively.
Further, there is an outstanding litigation in relation to inter alia grant of additional floor space index for
the Sea Rock Property. For details in relation to this litigation, see section “Outstanding Litigation and
Defaults” on page 206. Any adverse outcome in this ligation may affect our interest in the Sea Rock
Property.
9. A large portion of our revenue is realised from our range of luxury hotels and any adverse
development affecting these hotels or the regions in which they operate, may adversely affect our
business.
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In the year ended March 31, 2014, significant portion of our consolidated revenue was derived from our
luxury hotels. We are subject to risks inherent in concentrating our operations in the high end luxury
segment of the hotel industry. These risks include, among other things:
lack of improvement or worsening of global economic conditions;
reduction in the number of foreign tourists visiting India;
requirement of higher capital expenditure and funding, in comparison to the hotels outside the
luxury segment; and
intense competition from other high end luxury segment hotels.
Further, some of our key luxury hotels are located in Mumbai and New Delhi and these markets and
hotels are likely to continue to account for a large portion of our business in the future. Accordingly, we
are subject to certain risks associated with concentration of our key hotel properties in these cities such as
increase in supply of hotels and room capacity and competition which could have a material adverse
effect on our business, financial condition and results of operations.
10. There are outstanding legal proceedings against the Company, certain of its Directors and
Subsidiaries which may adversely affect our business, financial condition and results of operations.
There are outstanding legal proceedings against us that are incidental to our business and operations,
including certain criminal proceedings against the Company, certain of its Directors and executives and
its Subsidiaries. These proceedings are pending at different levels of adjudication before various courts,
tribunals, enquiry officers and appellate tribunals. Such proceedings could divert management time and
attention, and consume financial resources in their defense. Further, an adverse judgment in some of
these proceedings could have an adverse impact on our business, financial condition and results of
operations. Additionally, some properties on which we are developing projects are subject to litigation.
For details in relation to certain material litigation, see section “Outstanding Litigation and Defaults”
beginning on page 203.
A summary of the outstanding legal proceedings against the Company, its Directors and executives and
its Subsidiaries as disclosed in this Letter of Offer along with the amount involved, to the extent
quantifiable, have been set out below:
Litigation against the Company
S.
No.
Nature of Case Number of Outstanding Cases Amount involved (in ` crores)
1. Criminal 11 -
2. Civil 3 -
3. Notices 4 549.58*
* The aforementioned amounts include and relate to various show cause notices issued by the Enforcement Directorate,
Mumbai to the Company, some of its subsidiaries and others during the period between 2000 to 2002. Such notices relate
to an ongoing enquiry of select foreign currency transactions for the period prior to 1998. Besides the Company, notices have been served on Piem Hotels Limited and Taj International (HK) Limited in relation to transactions that were
entered into during the aforesaid years the value of which, cumulatively over a period of time, aggregates to ` 335.92
crores (approximately) for the Company and ` 107.09 crores (approximately) for the subsidiary companies. This amount also includes conversion of certain foreign currencies into Indian rupees calculated on average rate during the period
between January 1, 2000 and December 31, 2002. In addition to ` 549.58 crores indicated above, this matter also
includes value of certain transactions which are expressed in foreign currency and includes Nepalese Rupees 1.20 crores
(approximately), Riyali Omanis 10.82 lakhs (approximately), Hong Kong Dollars 1.27 lakhs (approximately) and Sri
Lankan Rupees 20.30 crores (approximately) for such past periods. For details of exchange rate of the aforesaid foreign currency, see section “Presentation of Financial Information” on page 12. Each of the show cause notice is being
contested by the concerned companies on merit, and as on date, no adjudication proceedings have been commenced
against the Company or any of its subsidiaries.
Litigation against the Directors*
S. No. Nature of Case Number of Outstanding Cases Amount involved (in ` crores)
Raymond N. Bickson
1. Criminal 2 -
2. Notice 1 -
20
S. No. Nature of Case Number of Outstanding Cases Amount involved (in ` crores)
K.B. Dadiseth
1. Criminal 1 -
Nadir Godrej
3. Criminal 4 -
4. Civil 2 -
Anil P. Goel
1. Notice 1 3.16** *This tabular description does not include the actions initiated by SEBI against the entities operating in the securities
market with which Directors are associated and which are disclosed on page 210. **This amount also includes conversion of certain foreign currencies into Indian rupees calculated on average rate
during the period between January 1, 2000 and December 31, 2002. In addition to ` 3.16 crores indicated above, this
matter also includes value of certain transactions which are expressed in foreign currency and includes Nepalese Rupees 40.12 lakh (approximately) and Sri Lankan Rupees 20.3 crores (approximately) for certain past periods. For details of
exchange rate of the aforesaid foreign currency, see section “Presentation of Financial Information” on page 12. Each
of the show cause notice is being contested on merit, and as on date, no adjudication proceedings have been commenced
against Mr. Anil P. Goel.
Litigation against the Subsidiaries
S.
No.
Nature of
Case
Number of Outstanding Cases Amount involved (in ` crores)
Benares Hotels Limited
1. Criminal 3 -
Piem Hotels Limited
1. Criminal 1 -
Taj GVK Hotels and Resorts Limited
1. Criminal 3 -
Taj SATS Air Catering Limited
1. Criminal 1 -
2. Notice 1 -
United Hotels Limited
1. Notice 1 -
11. We have historically derived and continue to derive a substantial portion of our revenue from our
operations in India and if we fail to continue to generate a significant portion of our revenue from
India, it may affect our growth prospects.
During the year ended March 31, 2014 and March 31, 2013, we derived 68.75% and 71.74% of our
consolidated revenue from our domestic operations. We heavily depend upon revenue derived from our
operations in India and we intend to continue to increase our presence and market share in India in the
future. However, we may not be able to achieve the estimated growth in India due to various factors such
as intense competition, decline in tourist arrivals and economic slowdown which could adversely affect
our growth prospects.
12. We have incurred and may continue to incur capital expenditure in development of hotels and if
development of these hotels is not completed within the estimated time or in accordance with the
planned expenditure, it may adversely affect our business, financial condition and results of
operations.
Development of our hotels are subject to potential risks and uncertainties, including changes in economic
conditions, delays in completion, cost overruns, shortages in materials or labour, defects in design or
construction, market or site deterioration after acquisition, delays in obtaining or inability to obtain
necessary permits and licenses, changes in location advantages of our existing and proposed properties,
21
possibility of unanticipated future regulatory restrictions such as stricter environmental regulations and
the diversion of management resources.
Further, the development of our hotels is normally performed by independent third party contractors. We
do not have direct control over the day to day activities of such contractors and rely on such contractors
to perform these services in accordance with the relevant contracts. If we fail to enter into such contracts
or if the contractors fail to perform their obligations in a manner consistent with their contracts or to the
standards we require, our hotels may not be completed in accordance with the standard and the timeframe
envisaged or may not be completed at all, which would cause time and cost overruns. If a contractor
engaged in construction of our hotel becomes insolvent, it may prove to be impossible to recover
compensation for such defective work or materials and we may incur losses as a result of funding the
repair of the defective work or paying damages to persons who have suffered loss as a result of such
defective work.
If any of these risks materialize, it may have a material adverse effect on our business, financial condition
and results of operations.
13. Some of the Company’s long term strategic investments which primarily relate to investments in the
subsidiaries, associate entities and jointly controlled entities, have witnessed a decline in their fair
value and we cannot assure you that there will be no further diminution in the value of these
investments.
As of March 31, 2014, the Company had a total gross long term investment of ` 3,838.59 crores, on a
standalone basis, out of which ` 3,694.53 crores were in the subsidiaries, associate entities and jointly
controlled entities of the Company constituting 96.25% of the total gross long term investments of the
Company. In relation to the investments of the Company, certain long term strategic investments of the
Company are normally carried at “cost” in its financial statements. Some of these investments have
witnessed a decline in their respective fair values on account of the global recessionary conditions that
have continued unabated in recent years. Accordingly, as of March 31, 2014, the Company has
recognized a cumulative diminution in the value of its investments for a total amount of ` 1,076.95 crores
in its standalone financial statements and ` 716.46 crores in its consolidated financial statements. For
further details, see the “Financial Statements” section on pages 121 and 173. We cannot assure you that
the value of these investments will not further decline in the future and any additional diminution in
value of these investments may adversely affect our financial condition.
14. Our Company had losses in the past and we cannot assure you that our Company would not have
losses in the future.
As of the years ended March 31, 2014 and March 31, 2013, our Company had loss after tax of ` 590.49
crores and ` 276.61 crores, respectively, on a standalone basis. Further, as of the years ended March 31,
2014 and March 31, 2013, on a consolidated basis, our Company had loss after tax (after minority
interest and share of associates) of ` 553.85 crores and ` 430.24 crores, respectively, and loss after tax
(before minority interest and share of associates) of ` 523.11 crores and ` 390.75 crores. In this regard, it
may be noted that the aforesaid loss after tax for the years ended March 31, 2014 and March 31, 2013
was largely due to diminution in the value of long term investments of ` 687.00 crores and ` 373.00
crores, respectively, on a standalone basis, recognized by the Company for the years ended March 31,
2014 and March 31, 2013 respectively, which were charged to the statement of profit and loss and
classified as exceptional items. We cannot assure you that our Company would not experience losses in
the future.
15. If we are unable to obtain the requisite approvals, licenses, registrations and permits to develop and
operate our hotels and other related businesses or are unable to renew them in a timely manner, our
operations may be adversely affected.
We require a number of regulatory approvals, licenses, registrations and permits for operating hotels and
other businesses undertaken by us. These approvals pertain to, amongst others, environmental clearances,
licenses from local authorities for manufacturing and sale of eatables and for operating eating and
lodging houses, land acquisition and no-objection from the Chief Fire Officer for fire safety. Whilst we
have obtained a number of required approvals, certain approvals may have expired in the ordinary course
of our business and we would have applied for renewal of such approvals. Additionally, we have applied
22
and may also need to apply for additional approvals in the ordinary course of our business. For further
details, see section “Government and Other Approvals” beginning on page 211.
Further, the approvals and licenses we have received in relation to our hotel business are subject to
numerous conditions, some of which are onerous and require us to incur substantial time and
expenditure. We cannot assure you that the approvals, licenses, registrations and permits issued would
not be suspended or revoked in the event of non-compliance or alleged non-compliance with any terms
or conditions thereof, or pursuant to any regulatory action. Any failure to renew the approvals that have
expired or apply for and obtain the required approvals, licenses, registrations or permits, or any
suspension or revocation of any of the approvals, licenses, registrations and permits that have been or
may be issued to us, may adversely affect our business, financial condition and results of operations.
16. Our ability to exercise management control over our joint ventures is often dependent upon the
consent of other participants who are not under our control. Disagreements or unfavourable terms in
agreements governing those joint ventures could adversely affect our operations.
We have entered into several joint venture arrangements and derive significant revenue from operation of
these joint venture arrangements. Our level of participation in each joint venture arrangement differs and
we do not have a controlling interest in some of these operations. Our ability to exercise management
control over these arrangements and investments made in the joint venture arrangements may depend
upon receiving the consent or co-operation of our joint venture partners. Whilst the precise terms of the
arrangements vary, our operations may be affected if disagreements develop with the joint venture
partners.
Further, we typically enter into shareholders agreements for these joint venture arrangements which
provide the responsibilities and obligations of the partners. It is possible that our joint venture partners
may not comply with their obligation under the respective arrangements which could subject us to a
variety of risks including, but not limited to:
partners may not be able to meet their capital contribution obligations;
partners may subject the property of the joint venture arrangement to liabilities exceeding those
contemplated;
partners may take actions that reduce our return on investment; or
partners may take actions that harm our reputation or restrict our ability to run our business.
Additionally, investment in third party entities exposes us to certain legal and business risks relating to
these entities. As minority shareholders in these entities, we do not control their decision making or
operations and there can be no assurance that the business decisions of such entities will always be in our
interest. We also do not control dividend decisions of these entities as decisions regarding dividend
payment require majority consent. These entities are legally distinct from the Company and have no
obligation to pay amounts due with respect to the Company’s obligations, or to make funds available for
such payments. The ability of these entities to make such payments to the Company will be subject to,
among other things, availability of funds, terms of each indebtedness and applicable local laws. If
dividend payments do not materialise in the amounts that we expect, we may not be able to recover our
investment in these, which could have an adverse effect on our business, financial condition and results
of operations.
17. Our existing leverage may impair our ability to obtain additional financing in future and subject us to
the risk of fluctuating interest rates and our cash flows may be insufficient to meet required payments.
As of the years ended March 31, 2014 and March 31, 2013, the indebtedness (including exchange
differences) of the Company was ` 2,690.60 crores and ` 2,522.27 crores, respectively on a standalone
basis and ` 4,252.01 crores and ` 3,817.64 crores, respectively on a consolidated basis. This does not
include redemption premium payable on debentures recorded under provision amounting to ` 654.50
crores as on March 31, 2014 and as on March 31, 2013 and the same is payable on redemption of
debentures. Over a period of time, we have strategically endeavoured to reduce our level of borrowings
and we believe that we will be able to repay or refinance existing debt and any other indebtedness when
it matures. However, our existing level of indebtedness subjects us to important consequences, including
but not limited to, the following:
23
requirement to dedicate a portion of our cash flow toward repayment of our existing debt (including
interest payment), which will reduce the availability of our cash flow to fund working capital, capital
expenditures and other general corporate requirements; and
fluctuations in market interest rates which may adversely affect the cost of our borrowings.
Further, certain of our indebtedness has been either (i) availed in foreign currency under the external
commercial borrowing route; or (ii) effectively converted into foreign currency commitments. The
payment of interest and repayment of principal amount of such loans may become costlier due to
prevailing exchange rate fluctuations. Additionally, some of the borrowings have floating interest rate,
linked to LIBOR, which subjects us to variability and uncertainty of future interest payment.
Furthermore, some of our fixed assets, both present and future, have been charged by way of first pari-
passu charge, in favour of lenders in connection with certain of our financing agreements. Our inability
to repay our loans may result in lenders exercising their rights under these agreements.
Additionally, certain of our borrowings require us to maintain certain financial covenants and in case of
any breach of these covenants and in absence of a waiver of all of such breaches by the concerned lender,
such lender may call for immediate repayment of the entire outstanding amount of the loan or such
breach may result in a default under other loan agreements, which may adversely affect our financial
condition and results of operation. Currently, the Company and its subsidiaries are not compliant with
one of the financial covenants (Consolidated Debt to Consolidated EBIDTA ratio) under two of their
financing agreements. We have duly reported the same to the loan facility agent and as of date, we have
not received any adverse response from the loan facility agent or the concerned lenders.
18. Operation of our hotels entail certain fixed costs that we may not be able to adjust in a timely manner
in response to reduction in demand and revenues and rising expenses and which could materially
adversely affect our business, financial condition and results of operations.
The fixed costs associated with owning hotels, including committed maintenance costs, property taxes,
leasehold payments and maintaining minimum levels of services may be significant. We may not be able
to reduce these fixed costs in a timely manner in response to changes in demand for services. Further, our
properties could be subject to increase in operating and other expenses due to adverse changes in terms of
our hotel management contracts, increasing age of our property and increases in property and other tax
rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative
expenses, which could adversely affect our business, financial condition and results of operations.
19. Our business operations are subject to significant regulation in India.
We and our business operations are subject to numerous laws and regulations in all of the locations in
which we operate, including those relating to the preparation and sale of food and beverages, such as
health and liquor licensing laws and environmental laws. Our hotels are also subject to laws and
regulations governing relationships with employees in relation to minimum wage and maximum working
hours, overtime, working conditions, hiring and terminating of employees and work permits. Monitoring
legal developments and maintaining internal standards and controls to abide by local rules and
regulations can be costly for us which could adversely affect our operations.
Further, our hotels are subject to extensive government and environmental laws and regulations which
govern the discharge, emission, storage, handling and disposal of a variety of substances that may be
used in or result from the operations of our businesses. These laws and regulations include the
Environmental Protection Act, 1986, the Air (Prevention and Control of Pollution) Act, 1981, the Water
(Prevention and Control of Pollution) Act, 1974 and other regulations promulgated by the Ministry of
Environment and the pollution control boards of the relevant states. We are required to conduct an
environmental assessment for most of our hotel projects before receiving regulatory approval for these
projects. These environmental assessments may reveal material environmental problems, which could
result in us not obtaining the required approvals. Additionally, if environmental problems are discovered
during or after the development of a project, we may incur substantial liabilities relating to cleanup and
other remedial measures and the value of the relevant hotels could be materially and adversely affected.
Any failure to comply with these rules and regulations could adversely affect our reputation and fines or
penalties may have an adverse effect on our financial condition and results of operations.
24
20. Any failure to protect our trademarks and other intellectual property could reduce the value of our
brands and harm our business.
We believe that trademarks and service marks are important assets to our business. In the course of our
business, we have been using trademarks, which are material to our business operations. We have
obtained several trademark and service mark registrations of our brands, we have applied for more than
150 trademark registrations and more than 100 service marks under several classes of the Trade Marks
Act, 1999. Some of our brands for which we have obtained or have applied for trademarks include:
Hotels - “Taj”, “Vivanta by Taj”, “The Gateway Hotel”, “Taj Hotels Resorts and Palaces”,
Forever”, “Taj Khazana”, “Taj Salon”, “The Taj Club” and “Earth”.
Whilst we take necessary steps to use, control and or protect our trademarks or other intellectual property
in India and other jurisdictions, we cannot assure you that the pending trademark applications will be
granted or that these will always be adequate to prevent third parties from copying or using the
trademarks or other intellectual property without authorization. For various reasons, we may either not
seek or not obtain or not maintain registration for all or some of our trademarks in all or some of our
jurisdictions. Third parties may also challenge our rights to certain trademarks or oppose our trademark
applications. Defending any such proceedings may be costly, and if unsuccessful, could result in the loss
of important intellectual property rights.
Our intellectual property may also be vulnerable to unauthorized copying or use in some jurisdictions
outside India, where local law, or lax enforcement of law, may not provide adequate protection. If our
trademarks or other intellectual property are improperly used, the value and reputation of our brands
could be harmed. There are times when we may need to resort to litigation to enforce our intellectual
property rights. Litigation of this nature could be costly, force us to divert our resources, lead to
counterclaims or other claims against us or otherwise harm our business or reputation. In addition, we
license certain of our trademarks to third parties. Failure to maintain, control and protect our trademarks
and other intellectual property could adversely affect our ability to attract guests or third party owners,
and could adversely impact our results.
21. New brands or services that we launch in the future may not be as successful as we anticipate, which
could have a material adverse effect on our business, financial condition and results of operations.
Our brands, Vivanta by Taj, Gateway and Ginger, have been introduced in the recent past. We may
launch additional branded hotel products and services in the future. We cannot assure you that any new
hotel brands launched by us will be accepted by the hotel owners, franchisees or customers, or that we
will be able to recover costs we incurred in developing such brands, or that our new brands, products or
services will be successful. If new brands, products and services are not as successful as we anticipate, it
could have a material adverse effect on our business, financial condition and results of operations.
22. Failure to keep pace with developments in technology could adversely affect our operations or
competitive position.
The hotel industry demands use of sophisticated technology and systems for property management, brand
assurance and compliance, procurement, reservation systems, operation of our customer loyalty
programs, distribution of hotel resources to current and future customers and guest amenities. These
technologies may require refinements and upgrades. The development and maintenance of these
technologies may require significant investment by us. We cannot assure you that as various systems and
technologies become outdated or new technology is required, we will be able to replace or introduce
25
them as quickly as required or in a cost-effective and timely manner. We also cannot assure you that we
will achieve the benefits we may have been anticipating from any new technology or system.
23. Our reservation system is an important component of our business operations and a disruption to its
functioning could have an adverse effect on our performance and results.
We have arrangements for a global reservation system that communicates reservations to our branded
hotels when made by individuals directly, either online or by telephone to our call centers, or through
intermediaries such as travel agents, internet travel websites and other distribution channels. The cost,
speed and efficiency of the reservation system are important aspects of our business and are an important
consideration for hotel owners in choosing to affiliate with our brands. Any failure to maintain or
upgrade, and any other disruption to our reservation system may adversely affect our business.
24. Our insurance coverage may not adequately protect us against risks including operating hazards and
natural disasters.
Our hotel properties are covered by insurance policies. Such insurance policies typically cover physical
loss or damage to our property and equipment arising from a number of specified risks. These risks may
pertain to burglary, fire, riot, strike, other material damage to property and development sites, business
interruption, terrorism and public liability. Whilst we believe that we maintain reasonable insurance
cover for all foreseeable contingencies and which are consistent with industry practices, the occurrence
of any event that is uninsurable or not adequately insured could have a material adverse effect on our
business, financial condition and results of operations.
Further, whilst we believe that our insurance coverage is adequate, there can be no assurance that any
claim under the insurance policies maintained by us will be honored fully, in part or on time. To the
extent that we suffer any consequential loss or damage that is not covered by insurance or exceeds our
insurance coverage, our business, financial condition and results of operations may be adversely affected.
25. We may choose to divest certain of our investments which we may not be able to achieve on
commercially profitable basis and which may materially affect our business, financial condition and
results of operations.
In the past, we have divested certain of our investments which were not compatible with our strategy. We
may continue to evaluate sale opportunities and in the event that we are able to agree on commercially
acceptable terms, we may choose to divest certain of our investments in order to realise value for such
businesses as well as achieve desired growth levels. It is possible that we may not be able to identify
suitable divestment opportunities, or if we do identify suitable opportunities, we may not be able to
complete those transactions on terms commercially acceptable to us or at all. In certain circumstances,
sale of properties or other assets may also result in lower than expected returns. Upon sale of our
properties or assets, we may become subject to contractual indemnity obligations, incur material tax
liabilities or, as a result of required debt repayment, face a shortage of liquidity. Additionally, any
dispositions could demand significant attention from our management that would otherwise be available
for business operations, which could harm our business.
26. We are vulnerable to failure of our information technology systems, which could adversely affect our
business, financial condition and results of operations.
Our information technology systems are a critical part of our business and sophisticated technology and
systems are used for property management, revenue management, brand assurance and compliance,
procurement, reservation systems, operation of our customer loyalty programme, distribution and guest
amenities. Whilst a centralized data recovery system is maintained at different locations, damage or
interruption to our information systems may require a significant investment to update or replace with
alternate systems, and we may suffer interruptions in our operations as a result. In addition, costs and
potential problems and interruptions associated with the implementation of new or upgraded systems and
technology or with maintenance or adequate support of existing systems could also disrupt or reduce the
efficiency of our operations. Any material interruptions or failures in our systems, including those that
may result from our failure to adequately develop, implement and maintain a robust disaster recovery
plan and backup systems could severely affect our ability to conduct normal business operations and, as a
result, may have a material adverse effect on our business operations and financial performance.
26
We may also have to make substantial additional investments in new technologies or systems to remain
competitive and protect our data. The technologies or systems that we choose may not be commercially
successful or the technology or system strategy employed may not be sufficiently aligned with the needs
of the business or responsive to changes in business strategy. As a result, we could lose customers, fail to
attract new customers or incur substantial costs or face other losses, any of which could have a material
and adverse effect on our business operations and financial performance.
27. We are required to comply with data privacy regulations.
The existing and emerging data privacy regulations limit the extent to which we can use personal
identifiable information. Compliance with these regulations may require changes in the way data is
collected, monitored, shared and used, which could increase operating costs or limit the advantages from
processing such data. In addition, non-compliance with data privacy regulations may result in fines,
damage to reputation or restrictions on the use or transfer of information.
In addition, breaches in security could expose us, our customers or the individuals affected, to a risk of
loss or misuse of this information, resulting in litigation and potential liability for us, as well as the loss
of existing or potential customers and damage to our reputation. The cost and operational consequences
of implementing further data protection measures could be significant and this may have a material
adverse effect on our business, financial condition and results of operations.
28. Our future success depends on our ability to achieve synergies across our businesses, replicate
successful models across jurisdictions and effectively manage our operational systems, procedures and
internal controls.
In the recent past, we have acquired significant interest in hotel assets in India and various overseas
markets such as the United States, the United Kingdom, South Africa, Australia and Maldives. Pursuant
to these acquisitions, we have sought to identify and achieve synergies and operational efficiencies across
business verticals in the various jurisdictions in which we operate. In addition, we have sought to
replicate successful business models from one jurisdiction in other jurisdictions across our international
network. However, there can be no assurance that we will be able to achieve the synergies that we seek
and generate the expected benefits. Further, we may not be able to effectively integrate our acquired
businesses into our existing operations, or we may incur higher than anticipated costs, or incur unknown
liabilities that could materially and adversely affect our business, financial condition and results of
operations.
29. We are subject to risks associated with the domestic and international property markets.
Our operations involve participation in the hotel and serviced apartment property market. As a participant
in such market, we may be unfavourably affected by factors specific to property markets, such as
changes in interest rates, availability of financing sources, the general cost of land and buildings,
legislation in the construction industry and hotel location requirements. Further, the cost and availability
of suitable property may be affected by certain macroeconomic factors such as a change in the domestic
and regional economic situation in the countries where a hotel property is located, changes in the
situation of the local markets where hotels are situated, such as surplus of hotel rooms, a reduction in
local demand for rooms as well as the related services or increased competition in the sector.
30. We have, in the past, entered into related party transactions and may continue to do so in the future.
The Company has entered and continue to enter into transactions with certain of its related parties. For
further details, see sections “Financial Statements – Audited Standalone Financial Statements as at and
for the year ended March 31, 2014 - Note 43” and “Financial Statements – Audited Consolidated
Financial Statements as at and for the year ended March 31, 2014 - Note 40” on pages 137 and 189
respectively. Whilst we believe that all such transactions have been conducted on an arm’s length basis,
there can be no assurance that we could not have achieved more favourable terms had such transactions
not been entered into with related parties.
31. Our contingent liabilities could adversely affect our financial condition.
We have created provisions for certain contingent liabilities in our financial statements. There can be no
assurance that we will not incur similar or increased levels of contingent liabilities in the current
27
Financial Year or in the future and that our existing contingent liabilities will not have material adverse
effect on our business, financial condition and results of operations. For further details in relation to our
contingent liabilities, see Financial Statements – Audited Standalone Financial Statements as at and for
the year ended March 31, 2014 - Note 30 and Financial Statements – Audited Consolidated Financial
Statements as at and for the year ended March 31, 2014 – Note 31 on pages 129 and 178 respectively.
32. The Company will not distribute the Letter of Offer and CAF to overseas Shareholders who have not
provided an address in India for service of documents.
The Company will dispatch the Letter of Offer and CAF (the “Offering Materials”) to the Shareholders
who have provided an address in India for service of documents. The Offering Materials will not be
distributed to addresses outside India on account of restrictions that apply to circulation of such materials
in various overseas juridictions. However, the recently notified Section 20 of the Companies Act, 2013
requires companies to serve documents at any address which may be provided by the members as well as
through e-mail. Presently, there is lack of clarity under the Companies Act, 2013 and the rules made
thereunder with respect to distribution of Offering Materials in overseas jurisdictions where such
distribution may be prohibited under the applicable laws of such juridiction. Whilst the Company has
requested all the Shareholders to provide an address in India for the purposes of distribution of Offering
Materials, the Company cannot assure that the regulator would not adopt a different view with respect to
compliance with Section 20 of the Companies Act, 2013 and may subject the Company to fines or
penalties.
Objects related risks
33. The Guwahati project and renovation/refurbishment of our hotel properties, towards which a portion
of the Net Proceeds is proposed to be utilised, have not been appraised by any bank or financial
institution or a third party consultant. In the event of any upward revision in these estimates due to
cost escalation or delay in implementing the planned expenditure, the Company may not be able to
achieve the desired results from the planned expenditure which could adversely affect the results of
operations of the Company.
The Company proposes to utilise ` 70.00 crores out of the Net Proceeds of the Issue towards part funding
of the capital expenditure proposed to be incurred for developing a premium five star hotel under the
brand “Vivanta by Taj” at Guwahati (the “Guwahati Project”). For further details, see section “Objects
of the Issue” on pages 55 to 57. Since the Guwahati Project has been funded through internal accruals
thus far, no independent appraisal has been undertaken by any bank or financial institution or a third
party consultant and the cost estimations and funding requirements of these projects are based on the
management estimates and internal study reports of the Company. Whilst a substantial portion of civil
construction of the Guwahati Project has been completed as of date, the Company may have to revise its
management estimates or the planned completion period for the remaining construction from time to
time. Consequently, if the funding requirements for the Guwahati Project increase, the Company may
need to procure additional sources of financing, which may not be readily available, or may not be
available on commercially reasonable terms.
Further, the Company also proposes to utilise an amount not exceeding ` 127.32 crores out of the Net
Proceeds towards renovation/ refurbishment of its existing hotel properties. For further details, see
section “Objects of the Issue” on page 61. The planned expenditure for renovation/refurbishment are
based on the internal estimates, cost analysis and past experience of the Company and have not been
appraised by any bank or financial institution or a third party consultant.
In the event that we are required to reschedule or revise the planned expenditure or the period of
completion of any of the aforesaid objects, our business, financial condition and results of operations
may be adversely affected.
34. Our management will have flexibility to utilize the Net Proceeds in relation to temporary investment of
the Net Proceeds pending utilization towards Objects of the Issue and we cannot assure you that the
temporary investment of the Net Proceeds will provide desired returns.
Pending utilisation of the Net Proceeds towards the Objects of the Issue, the Company will have
flexibility to temporarily invest the Net Proceeds in high quality interest bearing liquid instruments
28
including money market mutual funds, deposits with banks, corporates and other premium/interest
bearing securities. We cannot assure you that the temporary utilisation of the Net Proceeds by our
management will result in desired returns.
External Risks
35. We are subject to certain hotel industry related risks applicable in domestic and overseas markets.
Since our primary business is ownership and management of hotels in and outside India, we are subject
to certain risks typical to the hotels which are beyond our control. Some of these risks inter alia include:
increases in operating costs due to escalation of labour costs, utility costs (including energy
costs), increased taxes and insurance costs, as well as unanticipated costs owing to acts of
nature;
inflation which could increase our costs and decrease our operating margins;
increases in transportation and fuel costs for sustained periods and impediments to means of
transportation that could adversely affect domestic and international travel;
political instability in India and overseas markets;
changes in interest rates and in the availability, cost and terms of financing; and
changes in governmental laws and regulations, fiscal policies and incentives and the costs of
compliance.
The hotel industry has, in the past, been affected by some of the risks stated above. If in the future, one or
more of these risks materialise, our business, financial condition and results of operations would be
adversely affected.
36. Benefits and incentives enjoyed by the hotel industry in India may not continue and such change
could have an adverse impact on our business.
There are certain incentives and concessions granted or provided by the Government of India that are
currently being enjoyed by the hotel industry. For details of tax benefits available to the Company and to
its shareholders, see section “Tax Benefit Statement - Statement of Possible Direct Tax Benefits
Available to the Indian Hotels Company Limited (“The Company”) and to its Debenture Holders”
beginning on page 63. There is no guarantee that such incentives or concessions will continue or will not
be withdrawn by the Government of India in the future and such change could have an adverse impact on
our business.
37. Enforcement of foreign judgments against the Company or its management may not be possible or
may require additional legal proceedings.
The Company is a limited liability company incorporated under the laws of India. Majority of the
Directors and certain executive officers of the Company are residents of India. A substantial portion of
our assets and the assets of the Directors and the executive officers of the Company, who are Indian
residents, are located in India. As a result, it may be difficult for the investors to affect service of process
upon us or such persons outside India or to enforce judgments obtained against the Company or such
parties outside India.
India has reciprocal recognition and enforcement of judgments in civil and commercial matters with only
a limited number of jurisdictions, which includes the United Kingdom, Singapore and Hong Kong. In
order to be enforceable, a judgment from a jurisdiction with reciprocity must meet certain requirements
of the Indian Code of Civil Procedure, 1908 (the “Civil Code”). Judgments or decrees from jurisdictions
which do not have reciprocal recognition with India cannot be executed in India. Therefore, a final
judgment for the payment of money rendered by any court in a non-reciprocating territory for civil
liability, whether or not predicated solely upon the general laws of the non-reciprocating territory, would
not be enforceable in India. Even if an investor obtained a judgment in such a jurisdiction against the
29
Company or its officers or directors, it may be required to institute a new proceeding in India and obtain
a decree from an Indian court. However, the party in whose favour such final judgment is rendered may
bring a new suit in a competent court in India based on a final judgment that has been obtained in a non-
reciprocating territory within three years of obtaining such final judgment. If, and to the extent that, an
Indian court were of the opinion that fairness and good faith so required, it would, under current practice,
give binding effect to the final judgment that had been rendered in the non-reciprocating territory, unless
such a judgment contravenes principles of public policy in India. It is unlikely that an Indian court would
award damages on the same basis or to the same extent as was awarded in a final judgment rendered by a
court in another jurisdiction if the Indian court believed that the amount of damages awarded was
excessive or inconsistent with Indian practice. In addition, any person seeking to enforce a foreign
judgment in India is required to obtain prior approval of the RBI to execute such a judgment or to
repatriate any amount recovered.
38. Fluctuation of the Rupee against other currencies may affect our financial results and may influence
the destinations visited by travellers.
We own, manage and operate hotels in various countries and accordingly, receive payments in the
respective local currencies, such as U.S. Dollars, Pounds Sterling or in Euros. Changes in the value of
currencies with respect to the Rupee may cause fluctuations in our operating results expressed in Rupees,
and a possible fluctuation of the aforementioned currencies with respect to the Rupee may have an
unfavourable impact on such results. Appreciation of the Rupee could also affect realizations in other
currencies as it may not always be possible for prices (quoted in foreign currencies) to be revised upward
to compensate for Rupee appreciation. In the ordinary course of business, we may cover foreign
exchange risks using standard market instruments. Furthermore, the revenues of resort hotels operated by
us are subject to changes in exchange rates to the extent that one of the factors that influences the choice
of destination by leisure travellers is the strength of their local currency with respect to the currency of
their destination, making certain destinations more attractive when this relation is favourable to the
traveller.
39. Any downgrading of India’s debt rating by a domestic or international rating agency could negatively
impact the Company’s business.
Any adverse revisions to India’s credit ratings for domestic and international debt by domestic or
international rating agencies may adversely impact the Company’s ability to raise additional financing,
and the interest rates and other commercial terms at which such additional financing is available. This
could have an adverse effect on our financial results and business prospects, ability to obtain financing
for capital expenditures and the price of the Equity Shares.
40. Our business may be adversely affected by recent changes in competition law in India.
The Competition Act was enacted for the purpose of preventing practices having an appreciable adverse
effect on competition in India, and has mandated the Competition Commission of India (the “CCI”) to
regulate such anti-competitive practices. Under the Competition Act, any arrangement, understanding or
action, whether formal or informal, which causes or is likely to cause an appreciable adverse effect on
competition in India are void and may result in substantial penalties. Further, any agreement among
competitors which directly or indirectly involves determination of purchase or sale prices, limits or
controls production, shares the market by way of geographical area or number of customers in the
relevant market or directly or indirectly results in bid-rigging or collusive bidding is presumed to have an
appreciable adverse effect on competition in the relevant market in India and is considered void. Further,
the Competition Act prohibits the abuse of dominant position by any enterprise. If it is proved that the
contravention committed by a company took place with the consent or connivance or is attributable to
any neglect on the part of, any director, manager, secretary or other officer of such company, that person
shall be guilty of the contravention and may be punished. If we or any of our employees is penalised
under the Competition Act, our business may be adversely affected.
On March 4, 2011, the Government of India notified and brought into force the provisions under the
Competition Act in relation to combinations (the “Combination Regulation Provisions”) with effect
from June 1, 2011. The Combination Regulation Provisions require that acquisition of shares, voting
rights, assets or control or mergers or amalgamations, which cross the prescribed asset and turnover
based thresholds, shall be mandatorily notified to and pre-approved by the CCI. In addition, on May 11,
30
2011, the CCI issued the final Competition Commission of India (Procedure in regard to the Transaction
of Business relating to Combinations) Regulations, 2011, which sets out the mechanism for
implementation of the Combination Regulation Provisions under the Competition Act. The manner in
which the Competition Act and the CCI affect the business environment in India may adversely affect
our business.
41. Our transition to the use of the IFRS converged Indian Accounting Standards may adversely affect
our financial condition and results of operations.
On February 25, 2011, the Ministry of Corporate Affairs, Government of India (“MCA”), notified that
the IFRS converged Indian Accounting Standards (“IND AS”) will be implemented in a phased manner
and stated that the date of implementation of IND AS will be notified by the MCA at a later date. As of
date, there is no significant body of established practice on which to draw from in forming judgments
regarding the implementation and application of IND AS. Additionally, IND AS has fundamental
differences with IFRS and as a result, financial statements prepared under IND AS may be substantially
different from financial statements prepared under IFRS. As we adopt IND AS reporting, we may
encounter difficulties in the ongoing process of implementing and enhancing our management
information systems. The adoption of IND AS by us and any failure to successfully adopt IND AS in
accordance with the prescribed timelines could have an adverse effect on our financial condition and
results of operations.
42. Hostilities, wars and other acts of violence or manmade disasters could adversely affect the financial
markets and our business.
Wars, terrorism and other acts of violence or manmade disasters may adversely affect our business and
the Indian markets in which the Equity Shares trade or on which the CCDs are proposed to be listed. For
instance, previous terrorist attacks in India have resulted in an overall reduction in the number of visitors
to India since several countries issued travel advisories against travelling to India and many companies
curtailed travel. These acts may result in a loss of business confidence, make travel and other services
more difficult and have other consequences that could have an adverse effect on our business. In
addition, any deterioration in international relations, especially between India and its neighbouring
countries, may result in investor concern regarding regional stability which could adversely affect the
price of our CCDs and Equity Shares.
In addition, India has witnessed local civil disturbances in recent years and it is possible that future civil
unrest as well as other adverse social, economic or political events in India could have an adverse impact
on our business. Such incidents could also create a greater perception that investment in Indian
companies involves a higher degree of risk and could have an adverse impact on our business and the
market price of our CCDs and Equity Shares.
43. The occurrence of natural disasters could adversely affect our results of operations and financial
condition.
The occurrence of natural disasters, including hurricanes, floods, earthquakes, tornadoes, fires,
explosions, pandemic disease could adversely affect our results of operations or financial condition. The
potential impact of a natural disaster such as the H5N1 “avian flu” virus or the H1N1 “swine flu” virus
on our results of operations and financial condition is highly speculative, and would depend on numerous
factors. We cannot assure prospective investors that such events will not occur in the future or that our
results of operations and financial condition will not be adversely affected.
44. Changing laws, rules and regulations and legal uncertainties may adversely affect our business and
financial performance.
Our business and operations are governed by various laws and regulations. Our business and financial
performance could be adversely affected by any change in laws or interpretations of existing, or the
promulgation of new laws, rules and regulations applicable to us and our business.
There can be no assurance that the relevant governmental authorities will not implement new regulations
and policies which will require us to obtain additional approvals and licenses from the government and
other regulatory bodies or impose onerous requirements and conditions on our operations. Any such
31
changes and the related uncertainties with respect to the implementation of the new regulations may have
a material adverse effect on our business, financial condition and results of operations.
For instance, the Companies Act, 2013 has recently been passed by the Indian Parliament and has
received assent of the President of India. Certain sections of the Companies Act, 2013, have been notified
and the corresponding sections of the Companies Act, 1956 have ceased to have effect from the date of
notification of such sections of the Companies Act, 2013. Whilst the Companies Act, 2013 is not yet
fully operational, it envisages significant changes to the Indian company law framework, including the
issue of capital by companies, corporate governance, audit matters and corporate social responsibility,
introduction of a provision allowing the initiation of class action suits in India against companies by
shareholders or depositors, a restriction on investment by an Indian company through more than two
layers of subsidiary investment companies (subject to certain permitted exceptions), prohibitions on
loans to directors and insider trading and restrictions on directors and key managerial personnel from
engaging in forward dealing. The Companies Act, 2013 also provides for specific compliance
requirements such as obtaining prior approval from the audit committee, board of directors and the
shareholders for undertaking certain related party transactions. Various provisions of the Companies Act,
2013 are subject to further directions to be issued by the GoI.
Risks Related to the CCDs and Equity Shares
45. The Equity Shares may experience price and volume fluctuations or an active trading market for the
Equity Shares may not develop.
The price of the Equity Shares may fluctuate after this Issue as a result of several factors, including
volatility in the Indian and global securities markets, the results of our operations, the performance of our
competitors, developments in the Indian real estate sector and changing perceptions in the market about
investments in the Indian real estate sector, adverse media reports on us or the Indian real estate sector,
changes in the estimates of our performance or recommendations by financial analysts, significant
developments in India’s economic liberalisation and deregulation policies, and significant developments
in India’s fiscal regulations. Further, the price at which the Equity Shares are initially traded may not
correspond to the prices at which the Equity Shares will trade in the market subsequently.
46. An active market for CCDs may not develop, which may cause the price of the CCDs to fall.
The CCDs proposed to be issued by the Company by way of this Issue are a new class of securities of the
Company for which, currently, there is no trading market. No assurance can be given that an active
trading market for the CCDs will develop or as to the liquidity or sustainability of any such market, the
ability of CCD holders to sell their CCDs or the price at which CCD holders will be able to sell their
CCDs. If an active market for the CCDs fails to develop or be sustained, the trading price of the CCDs
could fall. If an active trading market were to develop, the CCDs could trade at prices that may be lower
than the initial offering price of the CCDs. In addition, the market for debt securities in emerging markets
has been subject to disruptions that have caused substantial volatility in the prices of securities similar to
the CCDs. There can be no assurance that the markets for the CCDs, will not be subject to similar
disruptions. Any disruptions in these markets may have an adverse effect on the market price of the
CCDs.
47. Conditions in the Indian securities market may affect the price or liquidity of the Equity Shares or
CCDs.
The Indian securities markets are smaller than securities markets in more developed economies. Indian
stock exchanges have in the past experienced substantial fluctuations in the prices of listed securities.
These exchanges have also experienced events that have affected the market price and liquidity of the
securities of Indian companies, such as temporary exchange closures, broker defaults, settlement delays
and strikes by brokers. In addition, the governing bodies of the Indian stock exchanges have, from time
to time, restricted securities from trading, limited price movements and restricted margin requirements.
Further, disputes have occurred on occasion between listed companies and the Indian stock exchanges
and other regulatory bodies that, in some cases, have had a negative effect on market sentiment. If similar
events occur in the future, the market price and liquidity of the CCDs or the Equity Shares could be
adversely affected.
32
48. There are restrictions on daily movements in the price of the Equity Shares, which may adversely
affect a security-holder’s ability to sell, or the price at which a security-holder can sell, Equity Shares
or CCDs at a particular point in time.
The Equity Shares issued upon conversion of the CCDs will be subject to a daily circuit breaker imposed
on listed companies by all stock exchanges in India which does not allow transactions beyond certain
volatility in the price of the Equity Shares. This circuit breaker operates independent of the index-based
market-wide circuit breakers generally imposed by SEBI on Indian stock exchanges. The percentage
limit on the Company’s circuit breaker is set by the stock exchanges based on the historical volatility in
the price and trading volume of the Equity Shares. The stock exchanges are not required to inform the
Company of the percentage limit of the circuit breaker from time to time, and may change it without the
Company’s knowledge. This circuit breaker would effectively limit the upward and downward
movements in the price of the Equity Shares. As a result of this circuit breaker, we cannot make any
assurance regarding the ability of shareholders to sell the CCDs or the Equity Shares or the price at
which shareholders may be able to sell their CCDs or Equity Shares.
49. Economic developments and volatility in securities markets in other countries may cause the price of
the CCDs and Equity Shares issued upon conversion of the CCDs to decline.
The Indian economy and its securities markets are influenced by economic developments and volatility
in securities markets in other countries. Investors’ reactions to developments in one country may have
adverse effects on the market price of securities of companies located in other countries, including India.
Any worldwide financial instability could also have a negative impact on the Indian economy, including
the movement of exchange rates and interest rates in India. Negative economic developments, such as
rising fiscal or trade deficits, or a default on sovereign debt, in other emerging market countries may
affect investor confidence and cause increased volatility in Indian securities markets and indirectly affect
the Indian economy in general. Further, the market price of the CCDs may be affected by fluctuations in
the market price of the Equity Shares. Any decline in the price of the Equity Shares may have an adverse
effect on the price and liquidity of the CCDs.
50. Any future issuance of the Equity Shares may dilute your future shareholding and sales of the Equity
Shares by the Promoter or other major shareholders of the Company may adversely affect the trading
price of the Equity Shares and the CCDs.
Any future equity issuances by the Company may lead to dilution of your future shareholding in the
Company. Any future equity issuances by the Company or sales of the Equity Shares by the Promoter or
other major shareholders of the Company may adversely affect the trading price of the Equity Shares. In
addition, any perception by investors that such issuances or sales might occur could also affect the
trading price of the Equity Shares of the Company.
Future issuances or the disposal of Equity Shares by any of the major shareholders of the Company or the
perception that such issues or sales may occur may significantly affect the trading price of the CCDs and
the Equity Shares. Except as otherwise stated in this Letter of Offer, there is no restriction on the
Company’s ability to issue Equity Shares or the relevant shareholders’ ability to dispose of their Equity
Shares, and there can be no assurance that the Company will not issue Equity Shares or that any such
shareholder will not dispose of, encumber, or pledge its Equity Shares.
51. You may be subject to Indian taxes arising out of capital gains on the sale of the Equity Shares or the
CCDs.
Capital gains arising from the sale of the Equity Shares are generally taxable in India. Any gain realised
on the sale of the Equity Shares on a stock exchange held for more than 12 months will not be subject to
capital gains tax in India if the securities transaction tax has been paid on the transaction. The securities
transaction tax will be levied on and collected by an Indian stock exchange on which the Equity Shares
are sold. Any gain realised on the sale of the Equity Shares held for more than 12 months to an Indian
resident, which are sold other than on a recognised stock exchange and as a result of which no securities
transaction tax has been paid, will be subject to capital gains tax in India. Further, any gain realised on
the sale of the Equity Shares held for a period of 12 months or less will be subject to capital gains tax in
India.
33
52. You may not receive the CCDs that you subscribe in the Issue until fifteen days after the date on
which this Issue closes, which will subject you to market risk.
The CCDs that you purchase in the Issue may not be credited to your demat account with the depository
participants until approximately 15 days from the Issue Closing Date. You can start trading such CCDs
only after receipt of the listing and trading approval in respect thereof. There can be no assurance that the
CCDs allocated to you will be credited to your demat account, or that trading in the CCDs will
commence within the specified time period, subjecting you to market risk for such period. Further, there
is no guarantee that the CCDs will be listed on the NSE and the BSE in a timely manner, or at all.
PROMINENT NOTES
1. Issue of upto 18,18,18,181 CCDs of face value of ` 55 each convertible into upto 18,18,18,181 Equity
Shares of face value of ` 1 each at a premium of ` 54 each aggregating upto ` 1,000.00 crores on a
rights basis to the Eligible Equity Shareholders in the ratio of 9 CCDs for every 40 fully paid-up Equity
Share(s) held by the Existing Equity Shareholders on the Record Date.
2. As on the year ended March 31, 2014, our Net Worth on a standalone basis was ` 2,693.84 crores, and
on a consolidated basis was ` 2,580.31 crores respectively, as described in the section “Financial
Statements” on pages 100 and 149.
3. For details of our transactions with related parties during the year ended March 31, 2014, the nature of
transactions and the cumulative value of transactions, see sections “Financial Statements – Audited
Standalone Financial Statements as at and for the year ended March 31, 2014 - Note 43” and “Financial
Statements – Audited Consolidated Financial Statements as at and for the year ended March 31, 2014 -
Note 40” on pages 137 and 189 respectively.
4. There has been no financing arrangement whereby the Promoter Group, the directors of our Promoters,
the Directors and their relatives have financed the purchase by any other person of securities of the
Company other than in the normal course of business of the financing entity during the period of six
months immediately preceding the date of filing of the Draft Letter of Offer with SEBI.
34
SECTION III: INTRODUCTION
THE ISSUE
The following is a summary of the Issue. This summary should be read in conjunction with, and is qualified in
its entirety by, more detailed information in the section “Terms of the Issue” on pages 224 to 227.
CCDs being offered by the Company Upto 18,18,18,181 CCDs
Rights Entitlement 9 CCDs for every 40 fully paid-up Equity Share(s)
held on the Record Date
Record Date July 21, 2014
Face Value/ Issue Price per CCD ` 55 per CCD
Issue Size Upto ` 1,000.00 crores
Interest on CCDs No interest shall be paid on the CCDs
Conversion Period of CCDs Period commencing from the date of Allotment and
upon expiry of 18 months from the date of Allotment
Conversion Price for CCDs ` 55 per Equity Share. The CCDs will compulsorily
and automatically convert into the Equity Shares
without any further act or payment on part of the CCD
holders in accordance with the terms of the CCDs. The
Issue Price payable at the time of subscription of the
CCDs will include the conversion price at which the
Equity Shares will be issued and allotted upon
conversion of the CCDs
Conversion Date for CCDs Each CCD is compulsorily and automatically
convertible into 1 Equity Share at ` 55 per Equity
Share upon expiry of 18 months from the date of
Allotment
Equity Shares outstanding prior to the Issue 807,489,291 Equity Shares*
Equity Shares outstanding after conversion of
CCDs (assuming full subscription for and
Allotment of the Rights Entitlement)**
Upto 989,307,472 Equity Shares*
Terms of the Issue For more information, see section “Terms of the
Issue” beginning on pages 224 to 227
Use of Issue Proceeds For further information, see section “Objects of the
Issue” beginning on page 54
*16,504 Equity Shares have been issued but not subscribed and have been kept in abeyance by the Company pending resolution of legal
dispute. **Assuming no further issuance or buyback of Equity Shares by the Company after the date of this Letter of Offer other than the issuance of Equity Shares pursuant to conversion of all CCDs.
Terms of Payment
Due Date Amount
On the Issue application (i.e. along with the CAF) ` 55 per CCD, which constitutes 100% of the Issue Price
35
Due Date Amount
payable
36
SUMMARY FINANCIAL INFORMATION
The following tables set forth the summary financial information derived from our Audited Standalone
Financial Statements and Audited Consolidated Financial Statements for the year ended March 31, 2014. Our
summary financial information presented below, is in Rupees/ Rupees Crore and should be read in conjunction
with the financial statements and the notes (including the significant accounting principles) thereto included in
the section “Financial Information” beginning on page 94.
STANDALONE BALANCE SHEET AS AT MARCH 31, 2014
March 31, 2014
` crores
March 31,
2013
` crores
Equity and Liabilities
Shareholders’ Funds
Share Capital 80.75 80.75
Reserves and Surplus 2,613.09 3,226.90
2,693.84 3,307.65
Non-current Liabilities
Long-term Borrowings 2,153.51 2,268.13
Deferred Tax Liabilities (net) 107.16 95.50
Other Long-term Liabilities 77.35 74.75
Long-term Provisions 581.08 674.42
2,919.10 3,112.80
Current Liabilities
Short-term Borrowings 161.59 193.54
Trade Payables 173.48 151.64
Other Current Liabilities 633.10 315.46
Short-term Provisions 185.26 144.30
1,153.43 804.94
Total 6,766.37 7,225.39
Assets
Non-current Assets
Fixed Assets
Tangible Assets 1,677.65 1,745.30
Intangible Assets 19.76 11.16
Capital Work-in-Progress 430.46 307.50
Intangible Assets Under Development 1.42 1.73
2,129.29 2,065.69
Non-current Investments 2,761.64 3,369.14
Long-term Loans and Advances 1,554.72 1,441.02
Other Non-current Assets 4.70 12.36
6,450.35 6,888.21
Current Assets
Inventories 40.18 38.37
Trade Receivables 124.41 125.22
Cash and Bank Balances 43.17 48.96
Short-term Loans and Advances 67.67 82.10
Other Current Assets 40.59 42.53
316.02 337.18
Total 6,766.37 7,225.39
37
STANDALONE STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31, 2014
March 31, 2014
` crores
March 31, 2013
` crores
Revenue
Rooms, Restaurants, Banquets and Other Operating Income 1,929.51 1,875.86
Other Income 47.82 48.93
Total 1,977.33 1,924.79
Expenses
Food and Beverages Consumed 176.83 164.08
Employee Benefit Expense and Payment to Contractors 472.53 476.73
Finance Costs 98.82 105.20
Depreciation and Amortisation 122.26 125.02
Other Operating and General Expenses 890.69 830.64
Total 1,761.13 1,701.67
Profit Before Tax and Exceptional Items 216.20 223.12
Exceptional Items (737.10) (432.91)
Loss Before Tax (520.90) (209.79)
Tax Expenses
Current Tax 58.06 52.61
Deferred Tax 16.37 25.43
Short Provision of Tax of Earlier Years (net) (4.84) (11.22)
Total 69.59 66.82
Loss After Tax (590.49) (276.61)
Earnings Per Share -
Basic and Diluted - ( ` ) (7.31) (3.47)
Face Value per Ordinary Share - ( ` ) 1.00 1.00
38
STANDALONE CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2014
March 31,2014
` crores
March 31, 2013
` crores
Cash Flow From Operating Activities
Net Cash From Operating Activities (A) 367.86 332.02
Cash Flow From Investing Activities
Net Cash Used In Investing Activities (B) (180.62) (233.81)
Cash flow From Financing Activities
Net Cash Used In Financing Activities (C) (183.79) (86.27)
Net Increase / (Decrease) In Cash and Cash Equivalents (A+B+C) 3.45 11.94
39
CONSOLIDATED BALANCE SHEET AS AT MARCH 31, 2014
March 31, 2014
` crores
March 31, 2013
` crores
Equity and Liabilities
Shareholders’ Funds
Share Capital 80.75 80.75
Reserves and Surplus 2,555.71 2,898.53
2,636.46 2,979.28
Minority Interest 735.86 707.72
Non-current Liabilities
Long-term Borrowings 3,023.88 3,431.18
Deferred Tax Liabilities (net) 165.58 128.79
Other Long-term Liabilities 77.94 76.22
Long-term Provisions 604.25 695.98
3,871.65 4,332.17
Current Liabilities
Short-term Borrowings 221.25 247.67
Trade Payables 341.33 319.13
Other Current Liabilities 1,442.28 547.08
Short-term Provisions 269.74 162.68
2,274.60 1,276.56
Total 9,518.57 9,295.73
Assets
Non-current Assets
Fixed Assets
Tangible Assets 5,585.83 5,342.48
Intangible Assets 48.87 40.46
Capital Work-in-Progress 548.96 400.57
Intangible Assets Under Development 5.23 20.93
6,188.89 5,804.44
Goodwill on Consolidation (net) 580.09 512.83
Non-current Investments 1,319.28 1,522.61
Deferred Tax Assets (net) 4.09 4.45
Long-term Loans and Advances 459.89 476.42
Other Non-current Assets 28.95 26.49
8,581.19 8,347.24
Current Assets
Current Investments 107.93 40.69
Inventories 102.07 96.74
Trade Receivables 280.49 273.98
Cash and Bank Balances 183.55 210.06
Short-term Loans and Advances 190.42 245.45
Other Current Assets 72.92 81.57
937.38 948.49
Total 9,518.57 9,295.73
40
CONSOLIDATED STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED MARCH 31,
2014
March 31, 2014
` crores
March 31,
2013
` crores
Income
Rooms, Restaurants, Banquets and Other Operating Income 4,066.19 3,743.36
Other Income 59.75 60.16
Total Income 4,125.94 3,803.52
Expenditure
Food and Beverages Consumed 427.07 381.55
Employee Benefit Expenses and Payment to Contractors 1,372.19 1,271.75
Finance Costs 168.51 170.74
Depreciation and Amortisation Expenses 308.13 288.42
Other Operating and General Expenses 1,707.36 1,552.42
Total Expenses 3,983.26 3,664.88
Profit Before Tax and Exceptional Items 142.68 138.64
Exceptional Items Gain / (Loss) (554.84) (430.43)
Loss Before Tax (412.16) (291.79)
Tax Expense
Current Tax 94.35 91.47
Deferred Tax 42.03 22.55
Minimum Alternate Tax Credit (0.59) (1.37)
Short / (Excess) Provision of Tax / Deferred Tax of earlier years (Net) (24.84) (13.69)
Total Tax Expenses 110.95 98.96
Loss After Tax before Minority Interest & Share of Associates (523.11) (390.75)
Profit attributable to Minority Interest (17.49) (40.86)
Share of Profit / (Loss) of Associates (13.25) 1.37
Loss After Tax, Minority Interest & Share of Associates (553.85) (430.24)
Earnings Per Share -
Basic and Diluted - (`) (6.86) (5.40)
Face Value per Ordinary share - (`) 1.00 1.00
41
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2014
March 31, 2014
` crores
March 31, 2013
` crores
Cash Flow From Operating Activities
Net Cash From Operating Activities (A) 538.92 501.77
Cash Flow From Investing Activities
Net Cash Used In Investing Activities (B) (301.04) (347.25)
Cash Flow From Financing Activities
Net Cash Used In Financing Activities (C) (211.86) (117.32)
Net Increase/(Decrease) In Cash and Cash Equivalents (A+B+C) 26.02 37.20
42
GENERAL INFORMATION
The Company was incorporated on April 1, 1902 as a public limited company under the Indian Companies Act,
The Company has appointed HDFC Bank Limited as the monitoring agency to monitor the utilization of the Net
Proceeds in terms of Regulation 16 of the SEBI Regulations.
Appraising Entity
None of the purposes for which the Net Proceeds are proposed to be utilized have been financially appraised by
any banks or financial institution or any other independent agency.
Book Building Process
As the Issue is a rights issue, the Issue shall not be made through the book building process.
Minimum Subscription
If the Company does not receive the minimum subscription of 90% of the Issue, the Company shall refund the
entire subscription amount received within 15 days from the Issue Closing Date. If there is delay in the refund of
the subscription amount by more than eight days after the Company becomes liable to pay the subscription
amount (i.e. 15 days after the Issue Closing Date), the Company shall pay interest for the delayed period, as
prescribed under Section 39 of the Companies Act, 2013.
Underwriting
This Issue is not underwritten.
Principal Terms of Loans and Assets charged as security
For details in relation to the principal terms of loans and assets charged as security in relation to the Company,
see section “Financial Statements” on pages 111, 115, 166 and 168.
47
CAPITAL STRUCTURE
The equity share capital of the Company as at the date of this Letter of Offer is as set forth below:
(In ` crores, except share data)
Aggregate Value at
Face Value
Aggregate
Value at
Issue Price
A AUTHORISED SHARE CAPITAL
2,000,000,000 Equity Shares of ` 1 each* 200.00 NA
B ISSUED CAPITAL BEFORE THE ISSUE**
807,489,291 Equity Shares of ` 1 each
80.75 NA
C SUBSCRIBED AND PAID-UP CAPITAL BEFORE THE
ISSUE
80.75 NA
807,472,787 Equity Shares of ` 1 each
D PRESENT ISSUE IN TERMS OF THIS LETTER OF
OFFER
Upto 18,18,18,181 CCDs of ` 55 each Upto 18.18 Upto 999.99
E ISSUED, SUBSCRIBED AND PAID-UP CAPITAL
AFTER THE ISSUE AND AFTER CONVERSION OF
CCDs AT CONVERSION PRICE
Upto 989,307,472** Equity Shares of ` 1 each Upto 98.93 NA
SECURITIES PREMIUM ACCOUNT (in ` crores)
Before the Issue 2,095.00
(on a standalone basis as of March 31,
2014)
After the Issue and after conversion of CCDs at Conversion Price
(assuming full conversion of all the outstanding CCDs)
3,076.1 (approximately)***
* The Board of Directors, pursuant to its resolution dated March 27, 2014 and the shareholders of the Company, pursuant to
their resolution dated May 23, 2014 by way of postal ballot have approved re-classification of the authorised share capital
of the Company from 1,000,000,000 Equity Shares of ` 1 each and 10,000,000 Cumulative Redeemable Preference Shares of
` 100 each into 2,000,000,000 Equity Shares of ` 1 each aggregating to ` 2,000,000,000. **16,504 Equity Shares have been issued but not subscribed and have been kept in abeyance by the Company pending
resolution of court/legal disputes.
***Subject to finalisation of Basis of Allotment, Allotment and deduction of Issue expenses.
The present Issue has been authorized by the Board of Directors, pursuant to its resolution dated March 27,
2014.
Notes to the Capital Structure
1. Shareholding Pattern of the Company as per the last filing with the Stock Exchanges
(i) The shareholding pattern of the Company as on June 30, 2014, is as follows:
Categor
y Code
Category of
Shareholde
r
No. of
Shareholder
s
Total no.
of Shares
No. of
Shares held
in
Demateriali
zed Form
Total Shareholding as a
% of Total No. of
Shares
Shares Pledge or Otherwise
Encumbered
As a
Percentag
e of (A+B)
As a
Percentag
e of
(A+B+C)
Numbe
r of
Shares
As a Percentage of
Total Shares
(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX)=(VIII)/(IV)*10
0 (A) Shareholding of
Promoter and
Promoter
Group
(1) Indian
(a) Individual /HUF 0 0 0 0.00 0.00 0 0.00
48
Categor
y Code
Category of
Shareholde
r
No. of
Shareholder
s
Total no.
of Shares
No. of
Shares held
in
Demateriali
zed Form
Total Shareholding as a
% of Total No. of
Shares
Shares Pledge or Otherwise
Encumbered
As a
Percentag
e of (A+B)
As a
Percentag
e of
(A+B+C)
Numbe
r of
Shares
As a Percentage of
Total Shares
(I) (II) (III) (IV) (V) (VI) (VII) (VIII) (IX)=(VIII)/(IV)*10
(iii) Statement showing holding of securities (including shares, warrants, convertible securities) of persons
belonging to the category “Public” and holding more than 1% of the total number of Equity Shares as
50
on June 30, 2014:
Sl.
No
Name of the
Shareholder
No. of shares
held
Shares
as %
of
Total
No. of
Shares
Details of warrants Details of convertible
securities
Total
shares
(including
underlying
shares
assuming
full
conversion
of
warrants
and
convertible
securities)
as a % of
diluted
share
capital
No. of
warrants
held
As a %
total
number
of
warrants
of the
same
class
Number of
convertible
securities
held
% w.r.t
total
number of
convertible
securities
of the
same class
1. Life Insurance
Corporation of
India
67,797,250 8.40 0 0 0 0 8.40
2. Government
Pension Fund
Global
38,252,169 4.74 0 0 0 0 4.74
3. LIC of India -
Market Plus
Growth Fund
16,953,393 2.10 0 0 0 0 2.10
4. General
Insurance
Corporation of
India
14,341,013 1.78 0 0 0 0 1.78
5. Saif III Mauritius
Company Ltd
13,107,574 1.62 0 0 0 0 1.62
6. Siwa Holdings
Ltd.
11,923,042 1.48 0 0 0 0 1.48
7. The New India
Assurance
Company Ltd.
11,530,462 1.43 0 0 0 0 1.43
8. Life Insurance
Corporation of
India P & Gs
Fund
9,082,074 1.12 0 0 0 0 1.12
9. LIC of India
Money Plus
Growth Fund
8,953,512 1.11 0 0 0 0 1.11
10. FID Funds
Mauritius Ltd.
8,317,199 1.03 0 0 0 0 1.03
TOTAL 200,257,668 24.80 0 0 0 0 24.80
51
(iv) Statement showing holding of securities (including shares, warrants, convertible securities) of persons
(together with Persons Acting in Concert) belonging to the category “Public” and holding more than
5% of the total number of Equity Shares as on June 30, 2014:
Sl.
No
Name of the
Shareholder(s)
and the Persons
Acting in
Concert (PAC)
with them
No. of
shares held
Shares
as %
of
Total
No. of
Shares
Details of warrants Details of convertible
securities
Total
shares
(including
underlying
shares
assuming
full
conversion
of warrants
and
convertible
securities)
as a % of
diluted
share
capital
No. of
warrants
held
As a %
total
number
of
warrants
of the
same
class
Number of
convertible
securities
held
% w.r.t
total
number of
convertible
securities of
the same
class
1. Life Insurance
Corporation of
India
67,797,250 8.40 0 0 0 0 8.40
TOTAL 67,797,250 8.40 0 0 0 0 8.40
2. No Equity Shares or Preference Shares have been acquired by the Promoter or members of the
Promoter Group in the year immediately preceding the date of filing of the Draft Letter of Offer with
SEBI.
3. Except as disclosed below, as on date of Draft Letter of Offer, none of the Equity Shares held by any of
the shareholders of the Company are locked in.
Sr.
No.
Name of the Shareholder Number of Shares Locked-in Shares as a
percentage of total number
of Equity Shares
1. Tata Sons Limited(1)
48,000,000 5.94
Total 48,000,000 5.94 (1)
Pursuant to conversions of 48,000,000 warrants on June 22, 2012, 48,000,000 Equity Shares of face value of ` 1 each had
been issued and allotted to Tata Sons Limited at a price of ` 103.64 per Equity Share, which are subject to lock-in for a
period of three years from the date of allotment.
4. In 1995, the Company issued 5,195,783 GDRs at a price of USD 16.60 each representing 5,195,783
equity shares of the Company of ` 10 each, which were listed on the London Stock Exchange Plc. and
196,380 GDRs were outstanding as of May 30, 2014.
5. Subscription to the Issue by the Promoter and the Promoter Group
Our Promoter, Tata Sons Limited, has undertaken to subscribe, on its own account, to the full extent of
its rights entitlement in the Issue. The members of the Promoter Group (except for the Trusts as
mentioned below) have undertaken to subscribe, on their own account, to the full extent of their rights
entitlement in the Issue.
Sir Dorabji Tata Trust, Lady Tata Memorial Trust and Sir Ratan Tata Trust (the “Trusts”), which are
members of the Promoter Group, have confirmed that they will renounce all of their rights entitlements
in favour of the Promoter of our Company since subscription to their rights entitlement in the Issue
would not be covered under the category of eligible investments under the provisions of the Bombay
Public Trusts Act, 1950, as amended. Such renunciation of the rights entitlement by the Trusts to the
Promoter of the Company has been undertaken due to operation of law, and consequently, would not be
considered as “renunciation” for the purpose of regulation 10(4)(b)(i) of Takeover Regulations. Our
Promoter has confirmed to subscribe, on its own account, to the full extent of any rights entitlement
that may be renounced in its favour by the Trusts. Accordingly, the rights entitlement of the Promoter
and the Promoter Group in this Issue will be fully subscribed as set forth above. The subscription by
our Promoter and other members of the Promoter Group to CCDs in this Issue to the extent of their
52
rights entitlement will not attract open offer requirements under the Takeover Regulations. Further, the
allotment of Equity Shares of the Company pursuant to conversion of CCDs subscribed by the
Promoter and other members of the Promoter Group of the Company to the extent of their rights
entitlement in this Issue shall be exempt from open offer requirements in terms of Regulation 10(4)(a)
of the Takeover Regulations.
Further, our Promoter has also undertaken to apply for additional CCDs and in the event of
undersubscription, any undersubscribed portion in the Issue, such that the Promoter’s total subscription
in the Issue including the subscription pursuant to (i) the full extent of the Promoter’s rights entitlement
in the Issue; (ii) renunciation by the Trusts to the Promoter; (iii) additional CCDs applied for by the
Promoter; and (iv) any unsubscribed portion, does not exceed 136,363,636 CCDs.
The Promoter Group entities have confirmed that they do not intent to subscribe to unsubscribed
portion in the Issue. Tata Investment Corporation Limited, a Promoter Group entity, may apply for
additional CCDs in addition to their rights entitlement in the Issue. Further, Ewart Investments Limited,
another Promoter Group entity, may apply for additional CCDs in addition to their rights entitlement in
the Issue subject to the total investment amount (including subscription to the rights entitlement by
Ewart Investments Limited) being upto ` 2.50 crores.
Such acquisition of CCDs or acquisition of Equity Shares pursuant to conversion of the CCDs by our
Promoter and other members of the Promoter Group over and above their rights entitlement will not
attract open offer requirements under the Takeover Regulations, subject to (A) compliance with
Regulation 10(4)(b)(i) of the Takeover Regulations (Promoter and members of the Promoter Group,
subscribing to the full extent of their rights entitlement and the Promoter subscribing to the full extent
of the rights entitlement renounced by the Trusts in its favour, as mentioned above) and (B) the
conversion price of the CCDs calculated on the basis of the conversion ratio (at which the CCDs are
converted to Equity Shares of the Company which will be specified in the Letter of Offer), not being
higher than the ex-rights price of the Equity Shares of the Company as determined as per Regulation
10(4)(b)(ii) of the Takeover Regulations.
The acquisition of Equity Shares of the Company on conversion of CCDs subscribed by the Promoter
and members of the Promoter Group shall be exempt from open offer requirements in terms of
Regulation 10(4)(a) and 10(4)(b) of the Takeover Regulations as mentioned above, and shall not result
in a change of control of the management of the Company. The date of acquisition for purposes of
reporting requirements specified in Regulation 10(6) and Regulation 10(7) of the Takeover Regulations
will be the date of conversion of the CCDs. The Company is in compliance with Clause 40A of the
Listing Agreement and will continue to comply with minimum public shareholding requirements
pursuant to the Issue and on allotment of Equity Shares upon conversion of CCDs as mentioned above.
6. Neither the Promoter nor the members of the Promoter Group hold any CCDs as of the date of this
Letter of Offer and no CCDs have been locked-in, pledged or encumbered.
7. None of the Equity Shares held by the members of our Promoter Group are pledged or otherwise
encumbered, as on date of Draft Letter of Offer.
8. The Issue being a rights issue, as per Regulation 34(c) of the SEBI Regulations, the requirements of
promoters’ contribution and lock-in are not applicable.
9. The Company does not have any employee stock option scheme or employee stock purchase scheme.
10. The Company has not undertaken any public issue in the three years immediately preceding the date of
this Letter of Offer.
11. Except for 196,380 GDRs outstanding as on date of this Letter of Offer, there are no outstanding
warrants, options or rights to convert debentures, loans or other instruments convertible into the Equity
Shares as on the date of filing of this Letter of Offer.
12. There will be no further issue of capital whether by way of issue of bonus shares, preferential
allotment, rights issue or in any other manner during the period commencing from submission of this
Letter of Offer with the Stock Exchanges within a period of six months from the Issue Opening Date.
13. The ex-rights price of the Equity Shares as per regulation 10(4)(b) of the Takeover Regulations is `
81.84.
53
14. If we do not receive the minimum subscription of 90% in this Issue or the subscription level falls below
90%, after the Issue Closing Date on the account of cheques being returned unpaid or withdrawal of
applications, we shall refund the entire subscription amount received within 15 days from the Issue
Closing Date. If there is delay in the refund of the subscription amount by more than eight days after
we become liable to pay the subscription amount (i.e., 15 days after the Issue Closing Date), we will
pay interest for the delayed period, as prescribed under Section 39 of the Companies Act, 2013.
15. At any given time, there shall be only one denomination of the CCDs and the Equity Shares of our
Company.
16. All Equity Shares are fully paid-up and there are no partly paid-up Equity Shares as on the date of this
Letter of Offer. Further, the Equity Shares allotted pursuant to conversion of CCDs, shall be fully paid
up. For further details on the terms of the issue, see section “Terms of the Issue” beginning on page
223.
54
OBJECTS OF THE ISSUE
The Company intends to utilize the proceeds from the Issue, after deduction of the Issue related expenses
(hereinafter referred to as the “Net Proceeds”), towards funding the following objects:
1. Part funding of capital expenditure proposed to be incurred by the Company for construction of
Vivanta by Taj, Guwahati;
2. Repayment or pre-payment of certain borrowings of the Company;
3. Funding of capital expenditure related to renovation proposed to be undertaken at some of our existing
hotels; and
4. General Corporate Purposes.
The main objects and objects incidental or ancillary to the main objects set out in our Memorandum of
Association enable the Company to undertake its existing activities and the activities for which the funds are
being raised by the Company through this Issue.
The details of the Net Proceeds are summarized in the table below: (In ` crores)
Particulars Amount
Gross Proceeds Upto 1,000.00*
Less: Estimated Issue related expenses 6.75**
Net Proceeds 993.25 *Subject to finalisation of the Basis of Allotment and the Allotment of the CCDs
***Company may incur additional expenditure upon conversion of the CCDs into the Equity Shares. Accordingly, such expenditure has not
been included in the Issue related expenses at this stage and it will be adjusted against the Issue Proceeds on or after the Conversion Date.
Means of Finance
The following table sets forth the total expenditure expected to be incurred in relation to the objects of the Issue,
the amounts proposed to be financed from the Net Proceeds and other means of financing: (In ` crores)
Sr.
No.
Object of the Issue Total
Estimated Cost
or Amount
Outstanding as
at May 31, 2014 (1), as applicable
Capital
Expenditure
Incurred as at
May 31, 2014
Amount
Proposed
to be
Financed
from Net
Proceeds
Amount
Proposed to
be Financed
from
Identifiable
Internal
Accruals
Percentage
amount
Proposed to be
Financed from
Net Proceeds or
Identifiable
Internal
Accruals (In %)
1. Part funding of the
capital expenditure
proposed to be incurred
by the Company for
construction of Vivanta
by Taj, Guwahati
166.80(2) 69.16 (3) 70.00 28.62 100.00
2. Repayment or pre-
payment of certain
borrowings of the
Company
552.68(4) Not Applicable 552.68 0.00 100.00
3. Funding of capital
expenditure related to
renovation proposed to
be undertaken at some
of our existing hotels
127.32(5) 0.00 127.32 0.00 100.00
4. General corporate
purposes
Not Applicable Not Applicable 243.25 - 100.00
55
Sr.
No.
Object of the Issue Total
Estimated Cost
or Amount
Outstanding as
at May 31, 2014 (1), as applicable
Capital
Expenditure
Incurred as at
May 31, 2014
Amount
Proposed
to be
Financed
from Net
Proceeds
Amount
Proposed to
be Financed
from
Identifiable
Internal
Accruals
Percentage
amount
Proposed to be
Financed from
Net Proceeds or
Identifiable
Internal
Accruals (In %)
(1)Including redemption premium, if any, payable at redemption on the NCD tranche proposed to be redeemed from the Net Proceeds.
(2) As approved by the Board through its resolution dated August 8, 2012. (3) As certified by Damji Merchant & Co, Chartered Accountants (Firm Registration Number: 102082W) vide their certificate dated June 26,
2014. (4) As certified by Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration Number: 117366W/W 100018) vide their
certificate dated July 10, 2014. Further, Deloitte Haskins & Sells LLP, the Chartered Accountants have confirmed that the said
borrowings have been utilized for the purposes for which they were availed. Also, the said amount includes premium payable at the time of redemption. For further details, see object titled “Repayment / pre-payment, in full or in part, of certain borrowings of the Company”
on pages from 58 to 60. (5) As certified by the management of the Company vide their certificate dated July 10, 2014.
The fund requirements mentioned above are based on the internal management estimates of the Company and
have not been appraised by any bank, financial institution or any other external agency. They are based on
current circumstances of our business and the Company may have to revise its estimates from time to time on
account of various factors beyond its control, such as market conditions, competitive environment, costs of
commodities and interest/ exchange rate fluctuations. Consequently, the fund requirements of the Company and
deployment schedules are subject to revisions in the future at the discretion of the management. If additional
funds are required for the purposes set forth above, such requirement may be met through our internal accruals,
additional capital infusion, debt arrangements or any combination thereof. Further, in the event of any shortfall
of funds for any of the activities proposed to be financed out of the Net Proceeds as stated above, the Company
may re-allocate the Net Proceeds to the activities where such shortfall has arisen, subject to compliance with
applicable laws.
The Company proposes to meet the entire fund requirements for the proposed objects of the Issue from the Net
Proceeds and identifiable internal accruals. Therefore, the Company is not required to make firm arrangements
of finance through verifiable means towards at least 75% of the stated means of finance, excluding the amount
to be raised from the Issue.
The following table sets forth the schedule of utilisation of the Net Proceeds:
Sr. No. Particulars Amount to be utilised (In ` Crores)
Fiscal 2015 Fiscal 2016
1. Part funding of the capital expenditure proposed to be
incurred by the Company for construction of Vivanta by
Taj, Guwahati
50.00 20.00
2. Repayment or pre-payment of certain borrowings of the
Company
552.68 0.00
3. Funding of capital expenditure related to renovation
proposed to be undertaken at some of our existing hotels
30.00 97.32
4. General corporate purposes 100.00 143.25
In the event that the Net Proceeds are not completely utilized for the purposes stated above by Fiscal 2016, the
same would be utilized in subsequent fiscal years.
Details of the activities to be financed from the Net Proceeds
1. Part funding of capital expenditure proposed to be incurred by the Company for construction of
Vivanta by Taj, Guwahati
56
We operate our upper upscale hotels through our “Vivanta by Taj” brand. For further details of our strategic
brand “Vivanta by Taj”, see section “Our Business” on page 81. The Company is currently developing a hotel
under the brand “Vivanta by Taj” at Guwahati (the “Vivanta Guwahati”).
The estimated cost of construction and commissioning of the Vivanta Guwahati is ` 166.80 crores. As certified
by Damji Merchant & Co, Chartered Accountants (Firm Registration Number: 102082W), through certificate
dated June 26, 2014, the capital expenditure incurred by the Company for construction of the Vivanta by Taj,
Guwahati as at May 31, 2014 was ` 69.16 crores. The Company intends to utilise ` 70.00 crores from the Net
Proceeds in Fiscal 2015 and Fiscal 2016 to part fund further capital expenditure proposed to be incurred for
construction of the Vivanta Guwahati. The balance capital expenditure is proposed to be funded from internal
accruals of the Company. Any borrowings availed by the Company for construction of the Vivanta Guwahati,
during the period commencing from the date of the Draft Letter of Offer up to the receipt of Net Proceeds, shall
be repaid from the Net Proceeds earmarked for this object as stated above.
Description of the Vivanta Guwahati
The Vivanta Guwahati is envisaged to be a hotel with 150 guestrooms and suites, three food and beverage
locations (which would include all-day dining restaurant, specialty restaurant and bar), banquet and conference
areas, a spa, a fitness centre and a swimming pool. The Vivanta Guwahati is being developed with a total built-
up area of 248,319 square feet on a leasehold land ad measuring approximately 20,147 square meters. The said
land has been leased by the Company from the Government of Assam, through a lease deed dated October 6,
2008, for a period of 60 years commencing from the date of the lease (the “Original Term”). Upon expiry of
the Original Term, the lease shall be renewed for a period of 30 years on same terms and conditions, except
commercial terms which shall be settled by mutual agreement between the parties.
Designing of the Vivanta Guwahati has been completed and the Company has appointed a reputed engineering
and construction company for construction of the said hotel. Construction of the Vivanta Guwahati commenced
in November, 2012 and is expected to be completed by first quarter of Fiscal 2016.
Project Cost and Amount Incurred as at May 31, 2014
Out of the total project cost of ` 166.80 crores, the Company has deployed an amount of ` 69.16 crores as at
May 31, 2014, towards the development of the Vivanta Guwahati. The table below provides details of various
components of the project cost and the cost incurred on each component as at May 31, 2014:
(In ` crores)
Sr.
No.
Details Total estimated
Project Cost
Amount of capital expenditure
incurred till May 31, 2014(1)
Balance capital expenditure
proposed to be incurred
1. Payment towards
construction contract
143.50 57.29 86.21
2. Piling works 5.85 5.50 0.35
3. Consultants 6.20 4.94 1.26
4. Project management
and others costs
11.25 1.43 9.82
Total 166.80 69.16 97.64 (1)As certified by Damji Merchant & Co, Chartered Accountants (Firm Registration Number: 102082W) vide their certificate dated June 26,
2014.
Of the balance amount of ` 97.64 crores to be incurred towards completion of construction of the Vivanta
Guwahati, the Company proposes to utilize ` 70.00 crores from the Net Proceeds and ` 27.64 crores from
identifiable internal accruals.
Schedule of Implementation
The Company expects to commission and operate the Vivanta by Taj - Guwahati by first quarter of Fiscal 2016.
The table below provides a breakup of major items forming part of the development and their expected date of
completion:
Sr.
No.
Details Expected completion date
1. Design and layout planning Completed
2. Land acquisition Completed
57
Sr.
No.
Details Expected completion date
3. Completion of shell and core Completed(1)
4. Completion of back of house areas and testing commissioning of major equipments November 2014(2)
5. Completion of guest floors and public areas January 2015(2)
6. Receipt of all necessary approvals to commence operations April 2015(2)
7. Commencement of commercial operations of the Vivanta Guwahati June 2015(2) (1) As certified by Edifice Consultants Private Limited, Architect through its certificate dated April 11, 2014. (2) As certified by the management of the Company through its certificate dated July 10, 2014.
58
2. Repayment or pre-payment of certain borrowings of the Company
The Company proposes to utilize an amount of ` 552.68 crores from the Net Proceeds towards full or partial repayment or pre-payment of certain borrowings availed by the
Company (including redemption premium on non-convertible debentures). The Company may repay or refinance some of its existing borrowings prior to Allotment.
Accordingly, the Company may utilise the Net Proceeds for repayment or pre-payment of any such refinanced loans or additional loan facilities obtained by it. However, the
aggregate amount to be utilised from the Net Proceeds towards repayment or pre-payment of borrowings (including re-financed or additional loans availed) would not exceed
` 552.68 crores.
The following table provides the details of the borrowings availed by the Company which are currently proposed to be fully or partly repaid or pre-paid from the Net
Proceeds:
Sr.
No.
Name of the
Lender
Nature of the
Borrowing
Date of the
Sanction
Letter/
Document
Amount
Borrowed
Principal
Amount
Outstanding as
at March 31,
2014(1)
Principal
Amount
Proposed to
be Repaid /
Prepaid(1)
Redemption
Premium
Proposed to be
Financed from
Net Proceeds(1)
Repayment Date /
Schedule
Purpose Pre-payment clause (if
any)
(In ` crores)
1.
HDFC Bank
Short Term Loan(2)
Sanction
letter dated
July 23, 2013
200.00 150.00 150.00 Not Applicable Loan tenor of 1 year
from the drawdown
date (i.e. July 25, 2013 & July 30, 2013).
However a put/ call
option is available at any time after 6 months
from the drawdown
date.
Bullet repayment of the
principal amount on maturity.
Need based
working capital
facility and for business
requirements
No pre-payment penalty if
pre-payment is at the end
of two months from the drawdown date and on
monthly rests (interest
payment dates). Thereafter, repayment is subject to a
prior notice of seven
working days prior to the pre-payment.
59
Sr.
No.
Name of the
Lender
Nature of the
Borrowing
Date of the
Sanction
Letter/
Document
Amount
Borrowed
Principal
Amount
Outstanding as
at March 31,
2014(1)
Principal
Amount
Proposed to
be Repaid /
Prepaid(1)
Redemption
Premium
Proposed to be
Financed from
Net Proceeds(1)
Repayment Date /
Schedule
Purpose Pre-payment clause (if
any)
(In ` crores)
2. HDFC Bank
Term Loan(2) Sanction
letter dated
August 20, 2013
100.00 100.00 100.00 Not Applicable Loan tenor of 3 years
from the drawdown
date (i.e. August 26, 2013). However a put/
call option is available
at 18 months from the drawdown date.
Bullet repayment of the principal amount on
maturity.
Need based
capital
expenditure and for business
requirements.
No pre-payment penalty if
pre-payment is at the end
of six months from the drawdown date and on
monthly rests (interest
payment dates). Thereafter, repayment is subject to a
prior notice of seven
working days prior to the pre-payment.
3. Various
Subscribers
to NCDs
3,000 Non-
convertible
Debentures of face
value of ` 1 million
each allotted on a
private placement
basis on March 22,
2010.(3)
Debentures are
currently rated as ICRA AA by ICRA
and Care AA+ by
CARE.
Disclosure
Document
dated March 18, 2010
300.00
300.00
60.00 27.22
Tenor of seven years
from the date of
allotment.
Debentures can be
redeemed in 3 annual instalments at the end
of the 5th, 6th and 7th
year from the date of allotment.
Amount payable on redemption at the end
of:
5th year: ` 87.22
crores
6th year: `
141.50 crores
7th year: ` 255.24 crores
Capital
expenditure,
refinance of existing debt and
general corporate
purposes.
-
4. Various
Subscribers to NCDs
1,500 Non-
convertible Debentures of face
Disclosure
document dated
150.00
150.00
150.00 65.46 Tenor of 5 years from
the date of allotment.
Capital
expenditure, refinance of
-
60
Sr.
No.
Name of the
Lender
Nature of the
Borrowing
Date of the
Sanction
Letter/
Document
Amount
Borrowed
Principal
Amount
Outstanding as
at March 31,
2014(1)
Principal
Amount
Proposed to
be Repaid /
Prepaid(1)
Redemption
Premium
Proposed to be
Financed from
Net Proceeds(1)
Repayment Date /
Schedule
Purpose Pre-payment clause (if
any)
(In ` crores)
value of ` 1 million
each allotted on a
private placement basis on December
9, 2009. (2)
Debentures
currently rated as ICRA[AA] by
ICRA and Care
AA+ by CARE.
December 8,
2009.
existing debt and
general corporate
purposes.
(1)As certified by Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration Number: 117366W/W 100018) vide its certificate dated July 10, 2014. Further, Deloitte Haskins & Sells LLP, Chartered
Accountants, have confirmed that these borrowings have been utilized for the purposes for which they were availed (2)The loan/ debentures are unsecured. (3)The debentures are secured by first pari passu charge on the fixed assets of the Company.
61
3. Funding of renovation / refurbishment capital expenditure at some of our existing hotels
As of May 31, 2014, we operated or managed 127 hotels and resorts with 15,690 rooms, and had presence across
various geographical segments, including beach resorts, hill stations, wildlife sanctuaries, and major cities and
tourist destinations. In order to maintain high standards of service and excellence that our brands are associated
with and to address growth in customers visiting our hotels, we regularly invest in the renovation, refurbishment
or expansion of existing facilities in our hotels.
Over the past six years, depending on commercial, competitive, liquidity and other considerations, we have
undertaken renovation and routine capital expenditure at many of our hotels, across geographic and branding
segments. Such renovation and routine capital expenditure included, amongst others:
(i). refurbishment of rooms and suites;
(ii). establishing new/ renovating restaurants and other facilities, such as gymnasiums, salons and spas;
(iii). renovation of key public areas, such as the hotel lobbies, coffee shops, bars and poolside areas;
(iv). refurbishment or establishment of board rooms, conference rooms and business centres; and
(v). revamping of ballrooms and banquet halls.
To meet these objectives, between Fiscal Year 2009 and Fiscal Year 2014, the Company has capitalised a total
of ` 373.36 crores towards renovation and routine capital expenditure in existing properties excluding capital
expenditure on new projects, expansion, restoration and corporate office (as certified by Damji Merchant & Co.,
Chartered Accountants (Firm Registration Number: 102082W), through its certificate dated June 20, 2014).
Some of the hotels in which Company had carried out renovations / refurbishments during the aforementioned
period are set out below:
Taj Palace, New Delhi: Renovation of key public areas including banqueting spaces, restaurants,
rooms and bar.
Taj West End, Bangalore: A phase wise renovation of public areas, select guest rooms, board room,
meeting spaces, health club and salon.
Gateway Hotel, Bangalore: Renovation of rooms, select banquet and meeting rooms and the lobby.
In addition to the above, the Company also completed extensive restoration work in the heritage wing and some
of the restaurants at Taj Mahal Palace, Mumbai which were badly damaged in terror attacks of November 2008.
As illustrated above, the Company undertakes renovation and refurbishment at its hotels on a regular basis in its
normal course of business. Such renovation is based on commercial, competitive, liquidity and other
considerations that are inherent in the business undertaken by the Company.
The Company proposes to utilise an amount not exceeding ` 127.32 crores out of the Net Proceeds towards
renovation or refurbishment in some of its existing hotels which include The Taj Mahal Palace, Mumbai, The
Taj Palace Hotel, New Delhi, The Taj West End, Bangalore, Vivanta by Taj – Fort Aguada, Goa and Taj
Exotica, Goa. The order in which the Company shall renovate / refurbish these existing properties shall be
decided by the Board of Directors or a duly authorised committee thereof, based on the assessment of the
prevalent circumstances of the business, commercial considerations and any regulatory requirements, subject to
a maximum of ` 127.32 crores from the Net Proceeds of the Issue. 4. General Corporate Purposes
The Company proposes to deploy the balance portion of Net Proceeds aggregating ` 243.25 crores towards
general corporate purposes, subject to such utilization not exceeding 25% of the Gross Proceeds, in compliance
with applicable laws.
The Company, in accordance with the policies formulated by our Board, will have flexibility in applying `
243.25 crores towards general corporate purposes, including, amongst other things, (a) brand building and other
marketing expenses; (b) acquiring assets, such as furniture and fixtures, and vehicles; (c) meeting any expenses
incurred in the ordinary course of business by the Company and our Subsidiaries, including salaries and wages,
rent, administration expenses, insurance related expenses, and the payment of taxes and duties; (d) repair,
maintenance, and upgradation of our existing hotels; and (e) any other purpose as permitted by applicable laws
and as approved by our Board or a duly appointed committee thereof.
Estimated Issue Related Expenses
62
The estimated Issue related expenditure is as follows:
S.
No.
Particulars Amounts
(` in crores)
Percentage of
Total Estimated
Issue Expenditure
Percentage of
Issue Size
1. 1. Fees of the Lead Managers 2.42 35.78 0.24
2. 2. Fees to the legal advisor, other
professional service providers and
statutory fees
2.36 34.97 0.24
3. 3. Fees of Registrar to the Issue 0.08 1.22 0.01
4. 4. Fees of Debenture Trustees 0.02 0.25 0.00
5. 5. Advertising and marketing expenses 0.03 0.44 0.00
6. 6. Printing and stationery, distribution,
postage etc.
1.35 19.94 0.13
7. 7. Other expenses (including miscellaneous
expenses and stamp duty)
0.50 7.40 0.05
Total estimated Issue related expenses* 6.75 100.00 0.68 *Company may incur additional expenditure upon conversion of the CCDs into the Equity Shares. Accordingly, such expenditure has not
been included in the Issue related expenses at this stage and it will be adjusted against the Issue Proceeds on or after the Conversion Date.
Bridge Financing Facilities
The Company has not availed any bridge loans from any bank / financial institutions as on the date of this Letter
of Offer, which are proposed to be repaid from the Net Proceeds.
Interim Use of Net Proceeds
Pending utilization for the objects described above, the Company, in accordance with the policies established by
our Board from time to time, will have the flexibility to deploy the Net Proceeds. The Company intends to invest
the funds in high quality interest bearing liquid instruments including money market mutual funds, deposits with
schedule commercial banks included in second schedule of Reserve Bank of India Act, 1934, corporates and
other premium / interest bearing securities. The Company confirms that pending utilization of the Net Proceeds
for the objects of the Issue, the Company shall not utilize the Net Proceeds for any investment in the equity
markets, real estate or related products.
Monitoring Utilization of Funds from the Issue
The Company has appointed HDFC Bank Limited as the Monitoring Agency in relation to the Issue. Our Board
will monitor the utilization of the Net Proceeds. The Company will disclose the utilization of the Net Proceeds
under a separate head in our balance sheet along with the relevant details, for all such amounts that have not
been utilized. The Company will indicate investments, if any, of unutilized Net Proceeds in the balance sheet of
the Company for the relevant Financial Years subsequent to receipt of listing and trading approvals from the
Stock Exchanges.
Pursuant to Clause 49 of the Listing Agreement, the Company shall, on a quarterly basis, disclose to the Audit
Committee the uses and applications of the Net Proceeds. The report submitted by the Monitoring Agency will
be placed before the Audit Committee of the Company, so as to enable the Audit Committee to make
appropriate recommendations to our Board.
In accordance with Clause 43A of the Listing Agreement, the Company shall furnish to the Stock Exchanges, on
a quarterly basis, a statement on material deviations, if any, in the utilization of the proceeds of the Issue from
the objects of the Issue as stated above. This information will also be published in newspapers simultaneously
with the interim or annual financial results after placing the same before the Audit Committee. In the event that
the Monitoring Agency points out any deviation in the use of Net Proceeds from the objects of the Issue as
stated above, or has given any other reservations with respect to the end use of Net Proceeds, the Company shall
intimate the same to the Stock Exchanges without delay.
Other confirmations
Except as stated above, no part of the proceeds from the Issue will be paid by the Company as consideration to
its Promoters, Directors, Group Companies or key managerial personnel, except in the normal course of its
business.
63
TAX BENEFIT STATEMENT
To,
The Board of Directors
The Indian Hotels Company Limited,
Mandlik House,
Mandlik Road,
Mumbai 400 001, India
Sub: Statement of Possible Direct Tax Benefits in connection with proposed rights issue (the “Issue”)
of The Indian Hotels Company Limited (the “Company” / the “Issuer”/ “IHCL”)
We report that the enclosed statement states the possible direct tax (viz Indian Income Tax Act, 1961 and Wealth
Tax Act, 1957) benefits available to the Company and to its shareholders under the current direct tax laws
referred to above, presently in force in India. Several of these benefits are dependent on the Company or its
shareholders fulfilling the conditions prescribed under the relevant provisions of the statute. Hence, the ability
of the Company or its shareholders to derive these direct tax benefits is dependent upon their fulfilling such
conditions.
The possible direct tax benefits discussed in the enclosed annexure are not exhaustive. This statement is only
intended to provide general information to investors and is neither designed nor intended to be a substitute for
professional tax advice. In view of the individual nature of the tax consequences and the changing tax laws, each
investor is advised to consult his or her own tax consultant with respect to the specific tax implications arising
out of their participation in the Issue particularly in view of the fact that certain recently enacted legislation may
not have a direct legal precedent or may have a different interpretation on the benefits, which an investor can
avail. Neither are we suggesting nor are we advising the investor to invest money based on this statement.
We do not express any opinion or provide any assurance as to whether:
i) the Company or its shareholders will continue to obtain these benefits in future; or
ii) the conditions prescribed for availing the benefits have been/would be met with.
The contents of the enclosed statement are based on the representations obtained from the Company and on the
basis of our understanding of the business activities and operations of the Company.
This statement is intended solely for information and for inclusion in the Offer Document in connection with the
proposed Issue of the Company and is not to be used, circulated or referred to for any other purpose without our
prior written consent.
Our views are based on the existing provisions of law referred to earlier and its interpretation, which are
subject to change from time to time. No assurance is given that the revenue authorities/courts will concur with
the views expressed in this Tax Benefit Statement. We do not assume responsibility to update the views
consequent to such changes.
The views are exclusively for the use of IHCL and shall not, without our prior written consent, be disclosed to
any other person, except to the extent disclosure is otherwise permitted by the terms of our engagement.
Disclosure of all or any part of this Tax Benefit Statement to any other person is on the basis that, to the fullest
extent permitted by law, neither DELOITTE HASKINS & SELLS LLP nor any other Deloitte Entity accepts any
duty of care or liability of any kind to the recipient, and any reliance on it is at the recipient’s own risk.
Disclosure of all or any part of this Tax Benefit Statement to any other person is on the basis that, to the fullest
extent permitted by law, neither PKF Sridhar & Santhanam nor any other PKF Entity accepts any duty of care
or liability of any kind to the recipient, and any reliance on it is at the recipient’s own risk.
64
Sincerely,
For PKF Sridhar & Santhanam For Deloitte Haskins & Sells LLP
using that for development of management plans, and undertaking process and product improvement including
continuous innovation in customer engagement activities. We also continue to strive for business excellence and
to achieve that we have adopted the Tata Business Excellence Model, which ensures our unremitting focus on
climate change, innovation, corporate governance and safety. We believe that these are essential foundations for
growth. We also intend to undertake selective expansion in strategic international locations. For example, we
propose to launch a luxury hotel in Dubai with 300 rooms during the Financial Year 2015.
Achieving Further Expansion and Growth through Asset-Light Operations
We intend to achieve future expansion largely though operating and management contracts, lease arrangements
or licensing arrangements, instead of ownership of hotel properties. This would enable our Company to
efficiently utilise capital for achieving future growth. By adopting this expansion strategy, we can effectively
increase our profits and expand our business without infusing substantial investment or undertaking significant
capital expenditure. Even for the hotels operated through operating and management contracts, lease
arrangements or licensing arrangements, we ensure that the high standards required for operating under the
“Taj”, “Vivanta by Taj” or “Gateway” brands are met. To achieve this for hotels under operating and
management contracts, we provide consultancy services during the construction period. Additionally, we believe
that apart from providing a better return on investment as compared to greenfield development of hotels,
operating hotels for third parties also increases our operating experience in, and knowledge of, markets
throughout India. This enhances our ability to identify and evaluate additional hotels for future development and
negotiate transactions for the same more effectively.
Continuously Strive to Improve Operational Efficiencies
We seek to improve our operational efficiencies by implementing holistic management plans for our hotels.
These include rationalizing sourcing costs, effective workforce management and efficient energy management.
We try to achieve this by centralized planning of our sourcing requirements and uniformity in consumables
utilized by the hotels within a particular strategic business segment, both of which enable us to negotiate
competitive rates with our vendors. We also undertake local procurement of operating supplies and raw
materials, which enables efficient logistics management and accordingly, reduced costs. We develop, wherever
possible, long term relationships with our suppliers. This affords us with the advantage of seamless delivery of
products, even in times or emergency, and feedback on emerging trends and new products. We continuously
implement various energy management initiatives, such as independent audit of energy consumption and
substitution of energy from non-renewable resources with that from renewable resources.
Focus on Marketing Initiatives and Customer Service for Improving Occupancy, ARR and RevPAR
We intend to improve occupancy, ARR and RevPAR by maintaining our high standards of service and quality
and by enhancing the visibility of our brands through concerted marketing efforts. To attract customers, we also
ensure the alignment of room types and tariffs to market demand. The tariffs at our hotels also vary according to
seasonality and we offer special promotional packages during the lean season. For example, during monsoons,
when some of our beach resort hotels witness tepid demand we offer special packages with reduced tariffs,
extended stays or meal plans. We also utilise our guest loyalty programmes as a tool to achieve this strategy and
believe that our Taj Inner Circle and Taj Epicure programmes have been effective in this respect. Our customer
service initiatives are focussed on providing a unique experience, which is founded upon highest global
hospitality benchmarks. We believe that this will enable us to enhance our brand image and encourage greater
customer loyalty. We also undertake segmentation of our customers, which include corporate and leisure for
rooms, and residential and no-residential for our food and beverage division. This enables us to ascertain
customer requirements more accurately and tailor our services to provide our customers with an unforgettable
experience.
Enhance the Brand Image of Our New Brands and Maximise Benefits Accruing from the “Taj” Brand
Our Vivanta by Taj, Gateway and Ginger brands have been introduced in the recent past. We intend to enhance
their brand image by undertaking specifically tailored activities, such as music festivals and other ticketed
events. In addition to that, we endeavour to provide consistency of service and facilities across each particular
strategic business segment. We will also continue to focus on capitalising on the brand equity of the “Taj” brand
by including it in promotional and marketing materials.
Our Business Operations
79
Operating Structure
We undertake our business through: (i) direct ownership of hotel properties, (ii) lease arrangements, (iii)
licensing arrangements, and (iv) operating and management contracts.
Our hotels which are operated by us under the ownership model are located on freehold land owned by us. The
land is either owned directly by the Company or by the Company’s subsidiaries or jointly controlled entities. For
such hotels the title to the buildings, and equipment and furniture or fixtures vests in us.
Some of our hotels are located on land which has been leased to us by governmental authorities or private
parties. The term of such leases varies from 30 years to 99 years, which is typically renewable upon expiry for
another term of equivalent period, subject to mutual agreement on the terms and conditions between us and the
lessor. We own the building, and furniture or fixtures and are required to pay a specified lease rental for the
duration of the lease deed.
We have also entered into licensing agreements to occupy and use buildings on a long-term basis for our
operating our hotels. Such agreements have been entered into with various parties, including governmental or
quasi-governmental authorities and are subject to payment of annual license fees, which may be subject to
escalation after periodic intervals. Typically, we provide services in relation to planning, designing, construction
and equipment of the hotel under these agreements and ownership of such hotels vests in the licensors at all
times. While we retain control over the management and operations of such hotels and are entitled carry on the
operation of the hotel in the manner that we deem fit, we may require consent of the owners for significant
alterations to the physical structures of the hotels. All costs and expenses related to the operation of the hotel are
borne by us and the property is required to be returned to the licensor in good condition upon expiry of the
license period, which ranges from 30 to 90 years. But, we are entitled to take away all movable items if the
licensor does not purchase them at a fair market value. Some of the license agreements provide for the first right
of refusal in our favour if the licensor proposes to sell the hotel property.
The following hotel properties of our Taj Group are maintained under license/lease arrangements:
S. No. Name of the Hotel Location
Taj
1. Taj Bengal Kolkata
2. St. James Court & 51 Buckingham Gate London
3. Taj Exotica Resort and Spa Maldives
4. Taj Wellington Mews Mumbai
5. Taj Mahal Palace Mumbai
6. Taj Lake Palace Udaipur
7. The Pierre – A Taj Hotel New York
8. Mohua Kothi Lodge Bandhavgarh
9. Taj West End Bangalore
10. Taj Falaknuma Palace Hyderabad
11. Banjaar Tola Kanha
12. Taj Mahal New Delhi
13. Taj Palace New Delhi
14. Baghvan Pench
15. Taj Samudra Colombo
Vivanta by Taj
16. Vivanta by Taj – Whitefield Bangalore
17. Vivanta by Taj – Connemara Chennai
18. Vivanta by Taj – Malabar Cochin
19. Vivanta by Taj – Surya Coimbatore
20. Vivanta by Taj- Coral Reef Maldives
21. Vivanta by Taj – President Mumbai
22. Vivanta by Taj – M.G. Road Bangalore
23. Vivanta by Taj – Yeshwantpur Bangalore
24. Vivanta by Taj Aurangabad
80
S. No. Name of the Hotel Location
25. Vivanta by Taj - Ambassador New Delhi
26. Vivanta by Taj - Begumpet Hyderabad
27. Vivanta by Taj – Hari Mahal Jodhpur
28. Vivanta by Taj Kumarakom
29. Vivanta by Taj - Madikeri Coorg
30. Vivanta by Taj Bentota, Sri Lanka
31. Vivanta by Taj Trivandrum
32. Usha Kiran Palace Gwalior
33. Banjara Hyderabad
34. Jai Mahal Palace Jaipur
Gateway Hotels
35. Gateway – Kuteeram Bangalore
36. Gateway – Residency Road Bangalore
37. Gateway – Rawalkot Jaisalmer
38. Gateway – Chandela Khajuraho
39. Gateway – Old Port Road Mangalore
40. Gateway – Savoy Ooty
41. Gateway Ernakulam
42. Gateway Varkala
43. Nadesar Palace & Gateway Ganges Varanasi
Ginger Hotels
44. Ginger Hotel Ahmedabad
45. Ginger Hotel, Inner Ring Road Bangalore
46. Ginger Hotel Bhubaneshwar
47. Ginger Hotel, IIT Chennai
48. Ginger Hotel, Vadapalani Chennai
49. Ginger Hotel Faridabad
50. Ginger Hotel Goa
51. Ginger Hotel Guwahati
52. Ginger Hotel Indore
53. Ginger Hotel Jamshedpur
54. Ginger Hotel, Andheri (East) Mumbai
55. Ginger Hotel Nashik
56. IRCTC Ginger Hotel, Rail Yatri Nivas New Delhi
57. Ginger Hotel Noida
58. Ginger Hotel Pantnagar
59. Ginger Hotel, Pimpri Pune
60. Ginger Hotel, Wakad Pune
61. Ginger Hotel Surat
62. Ginger Hotel Trivandrum
63. Ginger Hotel Vadodara
64. Ginger Hotel Jaipur
65. Ginger Hotel, East Delhi Delhi
Some of the hotels are operated and managed by us through operating and management contracts. In such cases,
apart from operating and managing the hotels, we also provide advice regarding project and design related
services at the construction stage through a separate technical services agreement. Operating and management
contracts provide us with the absolute and sole discretion in the supervision of the operation of the hotel. Under
these arrangements, we are entitled to basic management fee which is a fixed percentage of the gross income of
the hotel and an incentive fee linked to the gross operating profit of the hotel. We may also receive marketing
fee and project management fee under some of the operating and management contracts. The term of the
operating and management agreements typically ranges from 15 to 20 years, but the parties are entitled to early
termination, subject to a minimum lock-in period. Upon expiry of the initial term, these agreements are also
typically renewable for the period of the initial term, subject to mutual agreement of terms and conditions
between us and the owner.
81
Strategic brands
We operate and manage our hotels through four strategic brands namely, (i) Taj, which is our luxury brand, (ii)
Vivanta by Taj, which is our upper upscale brand, (iii) The Gateway Hotels, which is our upscale brand, and (iv)
Ginger Hotels, which caters to the budget travellers.
Our hotels under the Taj brand are located in all metropolitan cities in India, including Bengaluru, Chennai,
Hyderabad, Kolkata, Mumbai, and New Delhi, and some international destinations, which include Boston,
Colombo, Dubai, London, Maldives, and New York. Our luxury hotels, including our flagship hotel - the Taj
Mahal Palace, Mumbai, primarily cater to foreign and domestic high-end leisure travellers, looking for very high
quality and often personalised customer experience. We also operate four lodges under this strategic business
segment. These wildlife lodges are located at Bandhavgarh, Pench, Panna and Kanha national parks in the state
of Madhya Pradesh.
Our hotels under the Vivanta by Taj brand cater to cosmopolitan travellers seeking a reinvigorating
contemporary and creative hospitality experience. The hotels under this brand segment are designed to provide
customers with a complete travel experience, irrespective of the location and for achieving this, offer curated
and handpicked activities that are cued around the property and its location. For example, Vivanta by Taj –
Madikeri, Coorg offers bird sighting excursions with a noted ornithologist.
The Gateway is our upscale brand designed to offer business and leisure travellers with consistent quality in
service and style. A typical Gateway hotel is designed into seven simple zones catering to distinct requirements
of our customers, including those for work and leisure. The customer engagement initiatives of these hotels are
also designed to achieve that objective. An example of a unique customer engagement initiative undertaken by
the Gateway Hotels is the food campaign focussed on whole grains, and refined starch free, high fibre food
products.
Our Ginger brand of hotels is intended to cater to the budget travellers and has witnessed an increase in
corporate business travellers in the recent years. All the Ginger hotels are operated by Roots Corporation
Limited, a wholly-owned subsidiary of the Company.
Other Businesses
Food and Beverage Business
Our food and beverage business made significant contributions to our revenue for the Financial Year 2013. These
revenues are relatively less cyclical as they are also dependent on non-hotel resident clientele. We believe that the
food and beverage business helps us to enhance our brand visibility and we plan to continue focussing on providing
innovative and authentic cuisine and launching further food and beverage outlets.
Air Catering Business
We undertake air catering business through our subsidiary, Taj SATS Air Catering Limited. Our flight kitchens are
located at Amritsar, Bengaluru, Delhi, Goa, Kolkata and Mumbai. During the Financial Year 2014, our subsidiary,
Taj SATS Air Catering Limited, generated revenue of ` 245.10 crores and loss after tax of ` 10.31 crores. We
focus on supply to domestic customers. We have won awards for Inflight Kitchen of the Year, Delhi in 2012 and
Inflight Caterer of the Year, Delhi 2013.
Pricing
Our pricing policy is based on anticipated demand and other factors such as market conditions, inflation,
competition and the global economy. In addition to rack rates, we also offer discounted public rates, corporate
negotiated rates and travel trade rates to individuals, domestic and international corporations, and tour operators
and travel agents, respectively. Our contracted rates are negotiated on an annual basis and could be seasonal for
leisure business. We also have discounted public rates, which include variable packages and rates and seasonal
discounts.
Our corporate sales department is primarily responsible for formulation of our pricing strategy and policies for
all our hotels. It functions through various sub-groups such as national accounts, international travel and trade,
82
meetings, conferences and incentives, commercial sales and revenue management. We also utilise revenue
management software to assist us in determining pricing at different hotels at different times.
We also extend credit to corporations, tour operators, travel agents, conference organisers and individuals based
on their profiles and records of payment.
Sales and Marketing
Our sales and marketing functions are classified into three broad categories viz. (i) sales, (ii) marketing, and (iii)
customer relationship management (“CRM”). Through our sales and marketing initiatives, we seek to achieve
promotion of our brands, integration of newly acquired hotels and increase in RevPAR by increasing average
room rate and occupancy levels. We also endeavour to forge enhanced and deeper customer engagement through
relationship groups and effective utilisation of CRM tools.
Sales
Our national accounts team caters to top customer accounts and has a dedicated relationship team serving as a
single point of contact with our key customers. Our international travel and trade department located in
Mumbai is responsible for driving leisure business into our hotels, by targeting various segments such as
corporates, individuals, associations, travel agents and tour operators.
Our hotels are located in metropolitan cities and tier two cities in India are supported by our commercial
sales department. Internationally, we have established sales offices in various geographies including New
York, Los Angeles, San Francisco, London, Dubai and Singapore and appointed public relation agencies in
various countries such as the United States of America, the United Kingdom, France, Germany and Italy, to
develop business for all our hotels. Our global distribution systems and electronic marketing systems
handle relationships with travel consortiums and marketing of campaigns on global distribution networks.
Our key hotels are also members of the Leading Hotels of the World association which assists us in market
penetration.
Marketing
Our corporate marketing department is primarily responsible for advertising and promotion of our hotels in
India and overseas, publication of promotional magazines and strategic publicity. The marketing department
is responsible for creating and releasing advertisements in print and electronic media, for advertising visuals
of various products and services at the hotels and for the production of hotel brochures, directories and other
communication materials. Our corporate marketing department provides support to launch of new hotels
through media planning, marketing campaigns and promotions across national in-flight magazines, press,
hoardings and radio.
We also engage in various marketing initiatives. For example, we have recently launched a movement
celebrating artists who have left an indelible mark on our culture. We have also started a music concert series
and ticketed festivals at our Vivanta by Taj and Gateway hotels, which have been promoted though an extensive
marketing campaign across traditional and social media. We have also re-launched some of our previously
successful initiatives to drive incremental suite sales and revenues across our luxury hotels. In continuation with
our brand architecture initiative, we launched a brand book as well as a coffee table book aimed towards our
customers. In addition, we have undertaken strategic initiatives towards the luxury wedding segment in India
through our ‘Timeless Weddings at Taj’ initiative. We continue to focus on marketing of our resort
destinations for domestic travellers through our Taj Holidays platform. In this regard, we have commissioned a
holiday destination series on a major travel and lifestyle television network for our hotels.
Our loyalty programmes consist of Taj Inner Circle and Epicure, with Taj Inner Circle being our most popular
frequent-guest programme. The programme entitles members to various redemption benefits for points
accumulated by their stay and meals at our hotels in India and abroad. We also manage strategic marketing
alliances with various partners. These alliances provide opportunities to communicate special offers and
exclusive gift cards to members and assist us in driving business into our hotels.
Awards
Our hotels have been awarded several significant hospitality industry awards in India and internationally,
including:
83
Company was conferred the Gallup Global Great Workplace Award for the year 2013.
Company was conferred JRD Tata Quality Value Award for adoption of the Tata Business Excellence
Model.
Taj Hotels Resorts & Palaces
The Taj Hotels, Resorts and Palaces Group was adjudged as the Frontrunner in the Breakaway Brand
Category according to Young & Rubicam’s Annual Brand Study – Brand Asset Valuator (BAV), 2014.
The Taj Group of Hotels was conferred the Conde Nast Traveler USA World Savers Award 2013 for Poverty
Relief.
Taj Hotels Resorts and Palaces was adjudged as the Best Hotel Group in India at the Travel + Leisure India's
Best Awards 2013.
Taj Inner Circle was conferred the award for Favourite Hotel Loyalty Programme at the Conde Nast
Traveller India Readers' Travel Awards 2013.
Taj Hotels Resorts & Palaces was conferred the award for Best Hotel Chain in India at the UK Business
Traveller Awards 2013.
The Taj Mahal Palace, Mumbai
Wasabi by Morimoto, a restaurant at Taj Mahal Palace, Mumbai, ranked 36th on the San Pellegriino’s list of
‘50 Best Restaurants in Asia’.
Taj Mahal Palace, Mumbai featured on the Travel + Leisure Top 500 World's Best Awards survey.
The Taj Mahal Palace, Mumbai was adjudged as one of the best ranked properties in the world by Conde
Nast Traveler USA Gold List 2014.
The Taj Mahal Palace, Mumbai on the list of "Top City Hotels in Asia" in the Travel + Leisure World's Best
Awards 2013.
Taj Palace Hotel, New Delhi
Taj Palace Hotel, New Delhi was adjudged the “World’s Best Business Hotels” by Travel + Leisure USA in
2013.
Taj Mahal Hotel, New Delhi
Varq, a restaurant at Taj Mahal Hotel, Delhi's ranked 32nd on the San Pellegrino's list of ‘50 Best
Restaurants in Asia’ in 2014.
Taj Mahal Hotel, New Delhi featured on the list of Travel + Leisure Top 500 World's Best Awards in 2013.
The Pierre, A Taj Hotel, New York
The Pierre, A Taj Hotel, New York featured on the ‘Forbes Travel Guide Star Rating’ list and was adjudged as a
new Forbes Travel Guide Five-Star hotel by Forbes Travel Guide in 2014.
Taj Boston
Taj Boston was named among the “World’s Best Business Hotels” by Travel + Leisure’s ‘Worlds Best
Survey’ readers in 2013.
Taj Boston featured in the list of "Top Large City Hotels in Continental US" by Travel + Leisure in 2013.
51 Buckingham Gate, London
51 Buckingham Gate’s Cinema Suite has been conferred with the title of one of the “Best on the Planet” in Elite
Traveler's Top 101 Suites of the World list of 2013.
Vivanta by Taj, Madikeri, Coorg
Vivanta by Taj, Madikeri, Coorg, has been awarded the 3rd
position in the list of the World’s Best Hotels at the
16th
Annual Business Travel Awards, 2013 by Conde Nast Traveler US.
84
Competition
Our hotels operate in a highly competitive environment. Competition is primarily based on room rates,
quality of accommodations, service level, location and quality of amenities. In addition to the presence of
national brands, a number of international brands have also increased their presence in the Indian market in
recent years.
Whilst some of these hotels may have certain competitive advantages over us due to greater brand awareness,
global spread of operations and distribution networks, we believe our hotels have a better ability to levera ge
their location and quality of services. We also believe that our familiarity with the complex governmental
approval process associated with development of new hotels in India gives us a competitive advantage over
new entrants in the Indian market.
Intellectual Property
We believe that trademarks and service marks are important assets to our business. We have obtained more
than 100 trademark registrations and service mark registrations for our brands, including ‘Taj’, ‘Taj Lands
End Mumbai’, ‘Souk’, ‘Wasabi’ and ‘Vivanta by Taj’ under several classes of the Trade Marks Act, 1999.
We have also made more than 50 applications, which are currently pending, with respect to trademarks and
service marks including ‘Epicure’, ‘Taj Mahal Palace & Tower Mumbai’, ‘Gateway Hotel’ and ‘Taj Inner
Circle Rewards and Privileges’.
Employees
Certain categories of our employees are represented by trade unions. However, we maintain cordial
relationship with our employees and during the year ended May 31, 2014, none of our hotels had faced
strikes or other industrial disputes. We provide our employees with various benefits, which include medical
reimbursements and loans commensurate with an employee’s designation. The Company has been awarded
the Gallup Great Workplace Award for the fourth time in succession in 2013 for creating a highly engaged
workplace culture.
Training
We promote e-learning and distance learning for our managers through our partnerships with leading learning
content providers. We have also launched multi-tiered Leadership Development programmes for certain
category of our employees.
Corporate Social Responsibility
Corporate social responsibility is an important component of our operating philosophy. We believe that the
benefits that we derive from operating in geographically and culturally diverse locations should also benefit the
local communities. To achieve this we partner with both the local communities and national level governmental
initiatives for development of underprivileged communities through, amongst others, skill training for trades
involved in hotel operations.
We also partner with small scale entrepreneurs, women’s self-help groups non-governmental organizations to
source select goods and services, such as fresh food materials, housekeeping related consumables, candles, gift
items for guests, dry snacks, and pickles. We also constantly work towards facilitating awareness and revival of
indigenous arts and provide platform for (i) exhibition and sale of artifacts, and (ii) performances by local
artisans and culture troupes.
Information Technology
We have entered into arrangements for outsourcing our information technology needs in order keep pace with
technological advances and adopt the industry best practices and standards in terms of technology for our
operations and management. This arrangement will broadly cover services such as infrastructure support,
application support and technology advisory. We aim to address our evolving business needs for the purpose of
growth of our business facilitating consistent and integrated approach across various geographies in which we
operate.
85
OUR MANAGEMENT
Board of Directors
The Company’s Articles of Association provides that the minimum number of Directors shall be four and the
maximum number of Directors shall be 18. As of the date of this Letter of Offer, the Company has 11 Directors,
of which seven Directors are Non-Executive Directors and four of whom are Independent Directors. Jagdish
Capoor, an Independent and Non-Executive Director of the Company, retired from the Board with effect from
July 1, 2014 in accordance with the Tata Group Policy on Retirement Age of Directors. Further, since Guy
Lindsay Macintyre Crawford, who was considered as an Independent and Non-Executive Director of the
Company, had pecuniary relationship with the Company in the preceding and current Financial Years, he is
considered as a non-Independent Director as per Section 149(6)(c) of the Companies Act, 2013 and Clause 49 of
the Listing Agreement and accordingly, the Board, at its meeting held on May 30, 2014, has not recommended
to the Members for approval, the appointment of Guy Lindsay Macintyre Crawford as an Independent Director
of the Company. The Company is in the process of identifying other suitable Independent Directors who possess
the requisite Tata values and complying with the provisions of Clause 49 of the Listing Agreement.
Not less than two-thirds of the total number of Directors shall be elected Directors who are liable to retire by
rotation. At the Company’s AGM, one-third of the Directors for the time being who are liable to retire by
rotation shall retire from office. A retiring director is eligible for re-election. The quorum for meetings of the
Board of Directors is one-third of the total number of Directors, or two Directors, whichever is higher, provided
that where at any time the number of interested Directors exceeds or is equal to two-thirds of the total strength,
the number of remaining Directors present at the meeting, being not less than two, shall be the quorum.
The Directors of the Company are not required to hold any Equity Shares to qualify to be a Director.
The following table sets forth details regarding the Board of Directors of the Company as of the date of filing
this Letter of Offer:
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
Cyrus P. Mistry
Designation: Chairman
Term: Liable to retire by rotation
DIN: 00010178
Occupation: Company Director
Address: Sterling Bay 103, Walkeshwar Road,
Walkeshwar, Mumbai 400 006
46 Other Directorships
1. Cyrus Investments Private Limited
2. Imperial College India Foundation
3. Jaguar Land Rover Automotive Plc
4. Sterling Investment Corporation Private
Limited
5. Tata AG, Zug
6. Tata America International Corporation
7. Tata Chemicals Limited
8. Tata Consultancy Services Limited
9. Tata Enterprises (Overseas) AG, Zug
10. Tata Global Beverages Limited
11. Tata Industries Limited
12. Tata International AG, Zug
13. Tata Limited
14. Tata Motors Limited
15. Tata Sons Limited
16. Tata Steel Limited
17. The Tata Power Company Limited
86
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
18. Tata Teleservices Limited
Trusteeships
19. Manockjee Cowasjee Petit Charities
20. Pallonji Shapoorji Charity Trust
21. Shapooji Pallonji Foundation
22. Sheth Shapooji Pallonji Mistry & Bai
Alamai Shapoorji Mistry Charity Trust
23. Taj Public Service Welfare Trust
Raymond N. Bickson
Designation: Managing Director
Term: Period of five years from July 19, 2013
to July 18, 2018
DIN: 00050664
Occupation: Service
Address: Flat No. 10, Fourth Floor, Sea-Land
Apartment, Cuffe Parade, Mumbai 400 005
58 Other Directorships
1. Benaras Hotels Limited
2. Good Hope Palace Hotels Proprietary
Limited
3. Green Woods Palaces and Resorts Private
Limited
4. GVK Emergency and Research
Management Institute
5. Hotel Association of India
6. Institute of Hotel Management -
Aurangabad
7. OHL International Hotels (HK) Limited
8. Oriental Hotels Limited
9. Piem Hotels Limited
10. Roots Corporation Limited
11. St. James Courts Hotels Limited
12. Taj GVK Hotels & Resorts Limited
13. Taj International Hotels (HK) Limited
14. Taj International Hotels (UK) Limited
15. Taj Safaris Limited
16. Taj SATS Air Catering Limited
17. Taj Trade and Transport Company Limited
18. TAL Hotels and Resorts Limited
19. TAL Lanka Hotels Plc
20. Tal Maldives Resorts Private Limited
21. United Hotels Limited
87
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
Trusteeships
22. Trustees of the Culinary Institute of
America
23. Taj Public Service Welfare Trust
K. B. Dadiseth
Designation: Independent and Non-Executive
Director
Term: Liable to retire by rotation*
DIN: 00052165
Occupation: Non-executive director and
chairman of several public, private advisory
boards
Address: 8-A, Maneck, L.D. Ruparel Marg,
Malabar Hill, Mumbai 400 006
68 Other Directorships
1. Britannia Industries Limited
2. Godrej Properties Limited
3. ICICI Prudential Life Insurance Company
Limited
4. ICICI Prudential Trust Limited
5. JM Financial Limited
6. JM Financial Services Limited
7. Omnicom India Marketing Advisory
Services Private Limited
8. Piramal Enterprises Limited (previously
Piramal Healthcare Limited)
9. Siemens Limited
Trusteeships and Non-Corporates
10. Bai Hirabai J. N. Tata Navsari Charitable
Institution
11. Breach Candy Hospital Trust
12. Indian School of Business
13. Sir Ratan Tata Trust
14. The B.D. Peitit Parsee General Hospital
International and Others
15. Accenture Services Private Limited
16. Atos India Private Limited
17. Fleishman-Hillard Inc.
18. India Infoline Group
19. Marsh & McLennan Companies Inc., India
20. PwC – Pricewaterhouse Coopers Private
Limited
21. Prudential Asia Corporation
22. World Gold Council
Deepak Parekh
Designation: Independent and Non-Executive
Director
Term: Liable to retire by rotation*
69 Other Directorships
1. DP World, Dubai
2. GlaxoSmithKline Pharmaceuticals Limited
3. HDFC Asset Management Company
88
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
DIN: 00009078
Occupation: Non-executive chairman, Housing
Development Finance Corporation Limited
Address: HUL House, 165-166, Backbay
Reclamation, H T Parekh Marg, Churchgate,
Mumbai 400 020
Limited
4. HDFC Ergo General Insurance Company
Limited
5. HDFC Standard Life Insurance Company
Limited
6. Housing Development Finance Corporation
Limited
7. Mahindra & Mahindra Limited
8. Siemens Limited
9. Vedanta Resources Plc, London
10. Zodiac Clothing Company Limited
Other Interests
11. H.T. Parekh Foundation
12. Indian Institute of Human Settlements
Shapoor Mistry
Designation: Non-Executive Director
Term: Liable to retire by rotation
DIN: 00010114
Occupation: Industrialist
Address: Sterling Bay, 103, Walkeshwar Road,
Mumbai 400 006
49 Other Directorships
1. Afcons Infrastructure Limited
2. Cyrus Investments Private Limited
3. Eureka Forbes Limited
4. Forbes & Company Limited
5. Forvol International Services Limited
6. Gokak Power & Energy Limited
7. Gokak Textiles Limited
8. Pallonji Shapoorji & Company Private
Limited
9. Samalpatti Power Company Private
Limited
10. Shapoorji Pallonji and Company Limited
11. Shapoorji Pallonji Finance Limited
12. Shapoorji Pallonji Infrastructure Capital
Co. Limited
13. Shapoorji Pallonji Power Co. Limited
14. Sovereign Pharma Private Limited
15. Sovereignty Pharma Private Limited
16. SP Global Operations Limited
17. S. P. Oil Exp-loration Private Limited
18. Sterling Investment Corporation Private
Limited
Trusteeships
19. Dadysett Charity Trust
89
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
20. Manockjee Cowasjee Petit Charities
21. Masina Hospital
22. National Institute of Construction
Management and Research
Nadir Godrej
Designation: Independent and Non-Executive
Director
Term: Liable to retire by rotation*
DIN: 00066195
Occupation: Managing director of Godrej
Industries Limited, director of various other
Godrej group of companies and on the board of
other public companies
Address: 40-D, B. G. Kher Marg, Malabar Hill,
Mumbai 400 006
63 Other Directorships
1. ACI Godrej Agrovet Private Limited,
Bangladesh
2. Godrej And Boyce Manufacturing
Company Limited
3. Godrej Agrovet Limited
4. Godrej Consumer Products Limited
5. Godrej Consumer Products (UK) Limited
6. Godrej Global Mid East FZE
7. Godrej Industries Limited
8. Godrej International Limited
9. Godrej Nigeria Limited
10. Godrej Properties Limited
11. Godrej South Africa Limited
12. Godrej Tyson Foods Limited
13. Isprava Technologies Limited
14. Mahindra & Mahindra Limited
15. Tata Teleservices (Maharashtra) Limited
Other Interests
16. ABG Venture LLP
17. NGB Enterprise LLP
18. Poultry Processors Association of India
Ireena Vittal
Designation: Independent and Non-Executive
Director
Term: Liable to retire by rotation*
DIN: 05195656
Occupation: Strategic Advisor
Address: A2, 1202, World Spa East, Sector 30,
Gurgaon
45 Other Directorships
1. Axis Bank Limited
2. Godrej Consumer Products Limited
3. Titan Company Limited
4. Tata Global Beverages Limited
5. Wipro Limited
6. Zomato Modia Pvt. Ltd.
Guy Lindsay Macintyre Crawford
Designation: Non-Executive Director#
Term: Liable to retire by rotation
DIN: 06558172
62 Nil
90
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
Occupation: Vineyard owner and professional
Address: 12, Route des Meulieres, La Liviniere,
France 34210
# Since Guy Lindsay Macintyre Crawford, who was
considered as an Independent and Non-Executive Director of the Company, had pecuniary relationship with the
Company in the preceding and current Financial Years, he
is considered as a non-Independent Director as per Section 149(6)(c) of the Companies Act, 2013 and the revised
Clause 49 of the Listing Agreement and accordingly, the
Board, at its meeting held on May 30, 2014, has not appointed Guy Lindsay Macintyre Crawford as the
Independent Director of the Company.
Anil P. Goel
Designation: Executive Director - Finance
Term: Period of three years from March 17,
2013 to March 16, 2016
DIN: 00050690
Occupation: Service
Address: 93 A, Maker Tower, 9th
floor, Cuffe
Parade, Mumbai 400 005
57 Other Directorships
1. IHMS LLC
2. IHMS (Boston) LLC
3. IHMS (SA) (Proprietary) Ltd
4. IHMS (SF) LLC
5. International Hotels Management Services
Inc.
6. Kaveri Retreats and Resorts Limited
7. Lanka Island Resort Limited
8. OHL International (HK) Limited
9. Oriental Hotels Limited
10. Piem Hotels Limited
11. Piem International (HK) Limited
12. Roots Corporation Limited
13. Samsara Properties Limited
14. St. James Court Hotel Limited
15. Taj GVK Hotels and Resorts Limited
16. Taj Internationals Hotels (HK) Limited
17. Taj International Hotels Limited
18. Taj Kerala Hotels and Resorts Limited
19. Taj SATS Air Catering Limited
20. TAL Hotels and Resorts Limited
21. TAL Lanka Island Hotels PLC
22. TIFCO Holdings Limited
Trusteeships
23. Taj Public Service Welfare Trust
Abhijit Mukerji
Designation: Executive Director - Hotel
Operations
51 Other Directorships
1. ELEL Hotels & Investments Limited
91
Name, Designation, Term, DIN, Occupation,
and Address
Age
(in
years)
Other Directorships/ Interests/ Trusteeships
Term: Period of three years from March 17,
2013 to March 16, 2016
DIN: 00565023
Occupation: Service
Address: 252, Jupiter Apartments, Cuffe
Parade, Mumbai 400 005
2. Kaveri Retreats and Resorts Limited
3. PIEM Hotels Limited
4. TRIL Infopark Limited
5. United Hotels Limited
Trusteeships
6. Taj Public Service Welfare Trust
Other interests
7. The Institute of Hotel Management,
Aurangabad
Mehernosh S. Kapadia
Designation: Executive Director - Corporate
Affairs
Term: Period of five years with effect from
August 10, 2011 to August 9, 2016
DIN: 00050530
Occupation: Service
Address: 29, Woodhouse Apartment, 1st Floor,
Woodhouse Road, Colaba, Mumbai 400 001
61 Other Directorships
1. Bjets Pte. Limited
2. Business Jets India Private Limited
3. Business Jets Pte Limited
4. Ewart Investments Limited
5. Taj Air Limited
6. Taj Air Metrojet Aviation Limited
7. Taj SATS Air Catering Limited
8. The Associated Building Company Limited
9. Tata Realty and Infrastructure Limited
*In accordance with the requirements of Section 149 of the Companies Act, 2013, the Board, at its meeting held on May 30, 2014, has
approved, subject to approval of the Shareholders in the AGM scheduled to be held on August 27, 2014, appointment of K. B. Dadiseth,
Deepak Parekh, Nadir Godrej and Ireena Vittal as Independent Directors of the Company for a term of five years commencing from August 27, 2014 or date of retirement, whichever is earlier.
Relationship between the Directors
The details of relationship between the Directors of the Company are as follows:
S.
No
Name of Director Related to Nature of Relationship
1. Cyrus P. Mistry Shapoor Mistry Brother
2. Shapoor Mistry Cyrus P. Mistry Brother
Brief Biographies
Cyrus P. Mistry is the Non-Executive Chairman of the Company. He was appointed as an additional Director
and Non-Executive Chairman of the Company with effect from December 28, 2012. He holds a Bachelor’s
degree in Civil Engineering from the Imperial College of Science, Technology and Medicine, UK, a Master of
Science degree in Management from the London Business School and he is a Fellow of the Institution of Civil
Engineers. He has over 23 years of experience in real estate construction and investments industries. He is
presently the chairman of Tata Sons Limited. He has previously worked with Shapoorji Pallonji Group as the
managing director and was also on the board of the Construction Federation of India, Imperial College Advisory
Board and National Institute of Construction Management and Research.
Raymond N. Bickson is the Managing Director and Chief Executive Officer of the Company. He was appointed
as an Executive Director of the Company on January 9, 2003 and was re-appointed as the Managing Director of
the Company with effect from July 19, 2013 for a period of five years till present. He holds a degree in Deutsche
Sprachkurse from the Goethe Institute in Berlin, a degree in Cours de civilisation francaise et langues from the
92
Alliance Francaise in Paris, a degree in Cours de civilisation francaise et langues from the Université de
Sorbonne in Paris, a diploma de commerce et des langues from École Lemania - Lausanne a degree in
Production and Service from École Hôtelière Lausanne, and a degree in Financial Management and Front Office
Management from Cornell University in New York. He has also completed the Advanced Management
Programme at the Harvard Business School, and was awarded an Honorary Doctorate in Hospitality
Management by the Johnson & Wales University, Rhode Island. He has obtained his high school diploma from
St. Louis School, Honolulu, Hawaii, USA. He has over 41 years of experience in the hospitality industry. He has
previously worked with the Regent International Hotels, Hong Kong for 10 years, the Rafael Group of Hoteliers,
Monaco for 15 years and most recently, served as the vice president and general manager of The Mark Hotel,
New York for 15 years. He is presently a member of various committees including International Business
Leaders Forum, Rotary International, SKAL International, Confrerie de la Chaine des Rotisseurs, Chaine des
Rotisseurs, L'Ordre Mondial du Vin, Les Amis d'Escoffier, Society of New York Inc., American Institute of
Wine & Food, Hotel Executives Club of New York, The Order of The Knights of The Vine, Confrerie des
Chevaliers du Tastevin and Ecole Hotelier Lausanne de la Societe Suisse des hoteliers International Advisor
Board, Switzerland. He is also on the board of trustees of The Culinary Institute of America, chairman of World
Trade Travel and Tourism Council, president of the Hotel Association of India, chairman of the Experience
India Society, director of Industry Real Estate Finance advisory Council, director of the executive committee of
the Leading Hotels of the World and director of the Advisory Board of Ecole Hotelier Lausanne.
K.B. Dadiseth is an Independent Director of the Company. He was appointed as a Director of the Company on
May 9, 2000. He holds a Bachelor’s degree in Commerce from Sydenham College, Mumbai and is admitted as
an Associate and is a Fellow of the Member of the Institute of Chartered Accountants, England and Wales. He
has over 40 years of experience in general management and finance. After retiring as a whole-time director from
Unilever Plc and Unilever NV in UK and Holland respectively, he currently holds directorship of several public
limited companies and is on several advisory boards. He is the convening chairman of Marsh & McLennan
companies in India and a non-executive chairman of Omnicom.
Deepak Parekh is an Independent Director of the Company. He was appointed as a Director of the Company on
May 9, 2000. He holds a Bachelor’s degree in Commerce from the Bombay University and is an Associate of
the Institute of Chartered Accountants, England and Wales. He has over 44 years of experience in banking and
finance industry. He is presently the non-executive chairman with Housing Development and Finance
Corporation Limited (“HDFC”). He has previously worked with HDFC as its chairman.
Shapoor Mistry is a Non-Executive Director of the Company. He was appointed as a Director of the Company
on April 17, 2003. He holds a Bachelor’s degree in Business Administration and Economics from Richmond
College, London, England. He has over 27 years of experience in the field of management. Besides being on the
board of several companies, he is the non-executive chairman of Shapoorji Pallonji and Company Limited and
trustee of Masina Hospital and of National Institute of Construction Management and Research.
Nadir Godrej is an Independent Director of the Company. He was appointed as a Director of the Company on
November 7, 2008. He holds a Bachelor’s degree of Science (Chemical Engineering) from Massachusetts
Institute of Technology, a Master’s degree in Chemical Engineering from Stanford University and a Master’s
degree in Business Administration from Harvard Business School. He has over 38 years of experience in the
chemicals and agribusiness industry. He is presently the managing director of Godrej Industries Limited and
chairman of Godrej Agrovet Limited. Further, he is a member of various committees of the Confederation of
Indian Industries, a member of the board of trustees and various committees at the Foundation for Medical
Research. Currently, he is also the chairman of the CII National Committee on Chemicals and the president of
Alliance Francaise De Bombay. He has previously worked with Godrej Soaps Limited and Gujarat-Godrej
Innovative Chemicals Limited as director and managing director, respectively.
Guy Lindsay Macintyre Crawford is a Non-Executive Director of the Company. He was appointed as the
additional Director of the Company with effect from March 27, 2013. He completed a formal management
training program with British Transport Hotels in 1975 and has a National Examination Board in Supervisory
Studies from Westminister Hotel School, London. He went to Morrisons Academy for Boys, Crieff, Perthshire.
He completed a financial and marketing module as a part of the management trainee program at Surrey
University. He has over 30 years of experience in the international hospitality industry. He is on the international
advisory board of Strathclyde Business School, Glasgow University and presently, a non-executive director of
several private companies. He has previously worked with the Jumeirah Group, UAE as its chief executive
officer, the Macdonald Hotels plc, UK and the Forte Hotel Group as its managing director and the British
Transport Hotels Limited as its manager. He has also been elected as a Fellow of the Institute of Hospitality.
93
Ireena Vittal is an Independent Director of the Company. She was appointed as a Director with effect from
August 7, 2013. She holds a Master’s degree in Business Administration from the Indian Institute of
Management, Calcutta. She has over 24 years of experience in the corporate world across multiple industries.
She is presently a board member of companies including Axis Bank Limited, Zomato Modia Private Limited,
Godrej Consumer Products Limited and Titan Company Limited. She has previously worked with McKinsey &
Co. as a partner.
Anil P. Goel is a Whole-time Director designated as the Executive Director - Finance of the Company. He was
appointed as an Executive Director - Finance of the Company on March 17, 2008 and was re-appointed for a
period of three years with effect from March 17, 2013. He graduated in Honors from the Shri Ram College of
Commerce, New Delhi and is a Chartered Accountant. He has over 33 years of experience in the Tata group in
various financial roles. He has previously worked with Tata Global Beverages Limited (erstwhile Tata Tea Ltd)
and was the Chief Financial Officer of that Company from 2000 to 2004. He is presently also a Director on the
Board of several Taj Group Companies and oversees the finance, tax, mergers & acquisitions, central materials
and legal and secretarial functions.
Abhijit Mukerji is a Whole-time Director designated as the Executive Director - Hotel Operations of the
Company. He was appointed as a Director of the Company on March 17, 2008 and is re-appointed for a period
of three years with effect from March 17, 2013. He has completed the graduate course of study in hotel
administration from the Institut De Management Hotelier International founded and administered jointly by the
Cornell University School of Hotel Administration and the Ecole Superieure des Science Economiques et
Commerciales France (CORNELL ESSEC), and has completed the General Management Program from the
Harvard Business School. He has completed a diploma in hotel management from the Institute of Hotel
Management, Pusa, New Delhi. Further, Mr. Mukerji is a certified hotel administrator from the Educational
Institute of the American Hotel and Motel Association. He has over 29 years of experience in the hospitality
industry and with Tata and Taj group.
Mehernosh S. Kapadia is a Whole-time Director and Executive Director - Corporate Affairs of the Company.
He was appointed as a Director of the Company for a period of five years with effect from August 10, 2011. He
has completed a Diploma in Travel Management from Mumbai University. He has over 31 years of experience
in handling various issues with the Central and State Governments and Municipal authorities and has served in
various managerial positions in the Taj Group hotels. He is currently the chairman of Taj Air Limited, the vice-
chairman of Taj SATS Air Catering Limited and a director on the board of several companies of the Tata group.
Service agreements with the Directors
No service contracts have been entered into by the Directors with the Company providing for benefits upon
termination of employment. Additionally, the Company has a scheme for special retirement benefits for its
Managing and Executive Directors.
As of the date of this Letter of Offer, there are no arrangements or understanding with major shareholders,
customers, suppliers or others, pursuant to which the Company has appointed a director or a member of the
senior management.
94
SECTION V: FINANCIAL INFORMATION
FINANCIAL STATEMENTS
S.
No.
Particulars Page Number
1. Audited Standalone Financial Statements as at and for the year ended
March 31, 2014
95
2. Audited Consolidated Financial Statements as at and for the year ended
March 31, 2014 147
INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OFTHE INDIAN HOTELS COMPANY LIMITED
Report on the Financial Statements
We have audited the accompanying financial statements of THE INDIAN HOTELS COMPANY LIMITED (the “Company”) which comprise the Balance Sheet as at 31st March, 2014, the Statement of Profit and Loss and the Cash Flow Statement for the year ended, and a summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
The Company’s Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards notified under the Companies Act, 1956 (the “Act”) (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the Balance Sheet, of the state of affairs of the Company as at 31st March, 2014;
(b) in the case of the Statement of Profit and Loss, of the loss of the Company for the year ended on that date; and
(c) in the case of the Cash Flow Statement, of the cash flows of the Company for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by the Companies (Auditor’s Report) Order, 2003 (the “Order”) issued by the Central Government in terms of Section 227(4A) of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.
95
2. As required by Section 227(3) of the Act, we report that:
(a) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit.
(b) In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books.
(c) The Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement dealt with by this Report are in agreement with the books of account.
(d) In our opinion, the Balance Sheet, the Statement of Profit and Loss, and the Cash Flow Statement comply with the Accounting Standards notified under the Act (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs).
(e) On the basis of the written representations received from the directors taken on record by the Board of Directors, none of the directors is disqualified as on 31st March, 2014 from being appointed as a director in terms of Section 274(1)(g) of the Act.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
Sanjiv V. Pilgaonkar
Partner
(Membership No. 39826)
For PKF SRIDHAR & SANTHANAM
Chartered Accountants
(Firm’s Registration No. 003990S)
S. Ramakrishnan
Partner
(Membership No. 18967)
MUMBAI, 30th May, 2014
96
ANNEXURE TO THE AUDITORS’ REPORT(Referred to in paragraph 1 under ‘Report on Other Legal and Regulatory Requirements’ section of our report of even date)
(i) Having regard to the nature of the Company’s business / activities clauses (viii), (xiii) and (xiv), of paragraph 4 of CARO are not applicable to the Company.
(ii) In respect of its fixed assets:
(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of the fixed assets.
(b) The fixed assets were physically verified during the year by the Management in accordance with a regular programme of verification which, in our opinion, provides for physical verification of all the fixed assets at reasonable intervals. According to the information and explanation given to us, no material discrepancies were noticed on such verification.
(c) In our opinion, the fixed assets disposed off during the year, do not constitute a substantial part of the fixed assets of the Company and such disposal has not affected the going concern status of the Company.
(iii) In respect of its inventory:
(a) As explained to us, the inventories were physically verified during the year by the Management at reasonable intervals.
(b) In our opinion and according to the information and explanations given to us, the procedures of physical verification of inventories followed by the Management were reasonable and adequate in relation to the size of the Company and the nature of its business.
(c) In our opinion and according to the information and explanations given to us, the Company has maintained proper records of its inventories and no material discrepancies were noticed on physical verification.
(iv) According to the information and explanations given to us, the Company has neither granted nor taken any loan, secured or unsecured, to/from companies, firms or other parties covered in the Register under Section 301 of the Companies Act, 1956.
(v) In our opinion and according to the information and explanations given to us, there is an adequate internal control system commensurate with the size of the Company and the nature of its business with regard to purchase of inventory and fixed assets and for the sale of goods and services. During the course of our audit, we have not observed any major weakness in such internal control system.
(vi) In respect of contracts or arrangements entered in the Register maintained in pursuance of Section 301 of the Companies Act, 1956, to the best of our knowledge and belief and according to the information and explanations given to us:
(a) The particulars of contracts or arrangements referred to Section 301 that needed to be entered in the Register maintained under the said Section have been so entered.
(b) Where each of such transactions is in excess of ` 5 lakhs in respect of any party, the transactions have been made at prices which are prima facie reasonable having regard to the prevailing market prices at the relevant time.
(vii) In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 58A and 58AA, or any other relevant provisions of the Companies Act, 1956 and the Companies (Acceptance of Deposits) Rules, 1975, with regard to the deposits accepted from the public. According to information and explanations given to us, no order has been passed by the Company Law Board or the National Company Law Tribunal or the Reserve Bank of India or any Court or any other Tribunal in this regard in respect of the Company.
(viii) In our opinion, the Company has an adequate internal audit system commensurate with the size of the Company and the nature of its business.
97
(ix) According to the information and explanations given to us, in respect of statutory dues:
(a) The Company has generally been regular in depositing undisputed dues, including Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales Tax, Wealth Tax, Service Tax, Custom Duty, Excise Duty, Cess and any other material statutory dues with the appropriate authorities.
(b) There were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees’ State Insurance, Income Tax, Sales tax, Wealth Tax, Custom Duty, Excise Duty, Cess and other material statutory dues in arrears as at 31st March, 2014 for a period of more than six months from the date they became payable except for Service Tax dues of ` 0.82 crore which has been paid subsequently.
(c) Details of dues of Income Tax, Sales Tax, Excise duty and Service Tax which have not been deposited as on 31st March, 2014 on account of disputes are given below:
Name of Statute Nature of Dues ` Crore Period to which the amount relates
Forum where dispute is pending
Central Excise Act, 1994 Central Excise Tax
0.08 Financial Year 2011-12 The District Excise Officer, Jodhpur
Central Sales Tax Act, 1956 and Sales Tax/Value Added Tax Act of various states
VAT and Sales Tax
0.10 Financial Year 1992-94 and 2005-06
Tribunal
4.52 Financial Year 1999-2005 Joint Commissioner of Sales Tax (Appeal)
0.08 Financial Year 2003-05 Joint Commissioner of Sales Tax
1.60 Financial Year 2010-2011 & 2011-2012
Special commissioner VAT authority
1.73 Financial Year 1997-98, 2003-04, 2007-09 and 2013-14
High Court
0.07 Financial Year 2000-2001 and 2002-2003
Assessing Officer, Sales Tax
0.00 * Financial Year 2003-04 Ward-Sales Tax Department
0.61 Financial Year 2004-05, 2006-09 and 2010-11 to 2012-13
0.66 Financial Year 1994-1998, 2005-2006 and 2009-2010
Appellate / Revision Board
Finance Act , 1994 and Service Tax Laws
Service Tax 7.09 Financial Year 2002-03 to 2010-11
CESTAT
1.23 Financial Year 2006-07 to 2009-10 and 2011-12
Commissioner Appeals
0.77 Financial Year 2002-2006, 2010-11 and 2011-12
Commissioner of Service Tax (Additional / Assistant / Joint)
Income Tax Act, 1961 Income Tax 0.30 Financial Year 2005-08 Commissioner of Income Tax (Appeals), Panaji, Goa
* less than ` 1 lac
(x) The Company has accumulated loss as at the end of the financial year which is less than fifty per cent of its net worth. The Company has not incurred cash losses during the financial year covered by our audit and in the immediately preceding financial year.
98
(xi) In our opinion and according to the information and explanations given to us, the Company has not defaulted in the repayment of dues to banks, financial institutions and debenture holders.
(xii) In our opinion and according to the information and explanations given to us, the Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities.
(xiii) In our opinion and according to the information and explanations given to us, the terms and conditions of the guarantees given by the Company for loans taken by others from banks and financial institutions are prima facie, not prejudicial to the interests of the Company.
(xiv) In our opinion and according to the information and explanations given to us, the term loans have been applied for the purposes for which they were obtained, other than temporary deployment pending application.
(xv) In our opinion and according to the information and explanations given to us and on an overall examination of the Balance Sheet, there is a usage of short-term funds for long-term investment to the extent of ` 369.23 crores.
(xvi) According to the information and explanations given to us, during the year, the Company has not made any preferential allotment of shares to parties and companies covered in the Register maintained under Section 301 of the Companies Act, 1956. Accordingly, the provisions of paragraph 4(xviii) of the Order are not applicable to the Company.
(xvii) According to the information and explanations given to us, the Company has not issued any debentures during the year. Accordingly, the provisions of paragraph 4(xix) of the Order are not applicable to the Company.
(xviii) According to the information and explanations given to us, the Company has not raised any money by way of public issue during the year. Accordingly, the provisions of paragraph 4(xx) of the Order are not applicable to the Company.
(xix) To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company and no material fraud on the Company has been noticed or reported during the year.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
Sanjiv V. Pilgaonkar
Partner
(Membership No. 39826)
For PKF SRIDHAR & SANTHANAM
Chartered Accountants
(Firm’s Registration No. 003990S)
S. Ramakrishnan
Partner
(Membership No. 18967)
MUMBAI, 30th May, 2014
99
Balance Sheet as at March 31, 2014March 31, 2014 March 31, 2013
Tangible Assets 13 1,677.65 1,745.30 Intangible Assets 14 19.76 11.16 Capital Work-in-Progress 430.46 307.50 Intangible Assets Under Development 1.42 1.73
2,129.29 2,065.69 Non-current Investments 15 2,761.64 3,369.14 Long-term Loans and Advances 16 1,554.72 1,441.02 Other Non-current Assets 17 4.70 12.36 6,450.35 6,888.21 Current AssetsInventories 18 40.18 38.37 Trade Receivables 19 124.41 125.22 Cash and Bank Balances 20 43.17 48.96 Short-term Loans and Advances 21 67.67 82.10 Other Current Assets 22 40.59 42.53 316.02 337.18
Total 6,766.37 7,225.39 Summary of Significant Accounting Policies 2 The accompanying notes form an integral part of the Financial Statements 1 - 47
In terms of our report attached. For and on behalf of the BoardFor Deloitte Haskins & Sells LLP For PKF Sridhar & Santhanam Cyrus P. Mistry ChairmanChartered Accountants Chartered Accountants Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - FinanceAbhijit Mukerji Executive Director - Hotel OperationsMehernosh S. Kapadia Executive Director - Corporate Affairs
Deepak Parekh
DirectorsSanjiv V. Pilgaonkar S. Ramakrishnan Jagdish CapoorPartner Partner Nadir Godrej
ireena VittalGuy Lindsay Macintyre Crawford
Mumbai, May 30, 2014 Beejal Desai Vice President - Legal & Company Secretary
}100
Statement of Profit and Loss for the year ended March 31, 2014
March 31, 2014 March 31, 2013
Note ` crores ` crores
Revenue
Rooms, Restaurants, Banquets and Other Operating Income 23 1,929.51 1,875.86
Other Income 24 47.82 48.93
Total 1,977.33 1,924.79
Expenses
Food and Beverages Consumed 25 176.83 164.08
Employee Benefit Expense and Payment to Contractors 26 472.53 476.73
Finance Costs 27 98.82 105.20
Depreciation and Amortisation 122.26 125.02
Other Operating and General Expenses 28 890.69 830.64
Total 1,761.13 1,701.67
Profit Before Tax and Exceptional Items 216.20 223.12
Exceptional Items 29 (737.10) (432.91)
Loss Before Tax (520.90) (209.79)
Tax Expenses
Current Tax 58.06 52.61
Deferred Tax 16.37 25.43
Short/ (Excess) Provision of Tax/ Deferred Tax of Earlier Years (net) (4.84) (11.22)
Total 69.59 66.82
Loss After Tax (590.49) (276.61)
Earnings Per Share - 46
Basic and Diluted - ( ` ) (7.31) (3.47)
Face Value per Ordinary Share - ( ` ) 1.00 1.00
Summary of Significant Accounting Policies 2 The accompanying notes form an integral part of the Financial Statements 1 - 47
In terms of our report attached. For and on behalf of the BoardFor Deloitte Haskins & Sells LLP For PKF Sridhar & Santhanam Cyrus P. Mistry ChairmanChartered Accountants Chartered Accountants Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - FinanceAbhijit Mukerji Executive Director - Hotel OperationsMehernosh S. Kapadia Executive Director - Corporate Affairs
Deepak Parekh
DirectorsSanjiv V. Pilgaonkar S. Ramakrishnan Jagdish CapoorPartner Partner Nadir Godrej
ireena VittalGuy Lindsay Macintyre Crawford
Mumbai, May 30, 2014 Beejal Desai Vice President - Legal & Company Secretary
}101
Cash Flow Statement for the year ended March 31, 2014 March 31, 2014 March 31, 2013
Note ` crores ` crores Cash Flow From Operating Activities
Loss Before Tax (520.90) (209.79) Adjustments For : Depreciation and Amortisation 122.26 125.02 Amortisation of borrowing costs 1.35 1.48 Provision for Doubtful Debts and Advances 1.49 (2.47) (Profit)/Loss on sale of investments - (0.49) Loss on sale of assets 1.26 0.40 Dividend Income (22.55) (23.38) Interest Income (7.61) (5.79) Interest Expense 97.47 103.72 Unrealised Exchange Loss 21.94 5.07 Provision for Contingent Claims 20.81 (10.26) Provision for Diminution in value of long term Investments 687.00 373.00 Provision for Obligation of an Associate 1.72 27.55 Provision for Loyalty Programmes (net of Redemptions) 3.02 (0.25) Provision for Employee Benefits (2.74) 4.67
925.42 598.27 Cash Operating Profit before working capital changes 404.52 388.48 Adjustments for (increase)/ decrease in operating assets: Inventories (1.81) 1.42 Trade Receivables (0.27) (1.09) Short-term loans and advances 6.50 (9.61) Long-term loans and advances (18.91) (1.91) Other Current Assets (0.02) 9.51
(14.51) (1.68) Adjustments for (increase)/ decrease in operating liabilities: Trade Payables 21.84 2.78 Other Current Liabilities (6.20) (11.28) Other Long Term Liabilities 1.96 (0.19)
17.60 (8.69)
Cash Generated from Operating Activities 407.61 378.11 Direct Taxes Paid (39.75) (46.09)
Net Cash From Operating Activities (A) 367.86 332.02
Cash Flow From Investing Activities Purchase of Fixed Assets (145.36) (142.30) Sale of Fixed Assets 0.45 1.40 Purchase of long-term Investments (82.02) (121.37) Sale of current Investments - 0.49 Interest Received 15.18 4.19 Dividend Received 22.55 23.38 Bank Balances not considered as Cash and Cash Equivalents 9.97 (0.58) Long-term Deposits (placed)/ refunded by other companies (1.39) 0.98
Net Cash Used In Investing Activities (B) (180.62) (233.81)
102
Cash Flow Statement for the year ended March 31, 2014 March 31, 2014 March 31, 2013
Note ` crores ` crores Cash Flow From Financing Activities
Proceeds from Issue of Ordinary Shares - 373.10 Debenture Issue Costs (0.24) (1.42) Interest Paid (115.88) (118.87) Repayment of Long-term borrowings (61.17) (516.31) Proceeds from Long-term borrowings 100.00 200.00 Short-term Loans raised/ (repaid) (31.95) 70.97
Dividend Paid (Including tax on dividend) (74.55) (93.74) Net Cash Used In Financing Activities (C) (183.79) (86.27)
Net Increase In Cash and Cash Equivalents (A + B + C) 3.45 11.94 Cash and Cash Equivalents - Opening - 1st April 34.82 22.88 Cash and Cash Equivalents - Closing - 31st March 38.27 34.82
Footnote : Reconciliation of Cash and Cash Equivalents with Cash and Bank Balances as per the Balance Sheet Cash and Cash Equivalents as above 38.27 34.82 Add : Other Cash and Bank Balances
Cash and Bank Balances as per the Balance Sheet 44.41 50.93 Less : Classified as Non-Current (Refer Note 17) 1.24 1.97 Cash and Bank Balances classified as Current (Refer Note 20) 43.17 48.96 Summary of Significant Accounting Policies 2
The accompanying notes form an integral part of the Financial Statements 1 - 47
In terms of our report attached. For and on behalf of the BoardFor Deloitte Haskins & Sells LLP For PKF Sridhar & Santhanam Cyrus P. Mistry ChairmanChartered Accountants Chartered Accountants Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - FinanceAbhijit Mukerji Executive Director - Hotel OperationsMehernosh S. Kapadia Executive Director - Corporate Affairs
Deepak Parekh
DirectorsSanjiv V. Pilgaonkar S. Ramakrishnan Jagdish CapoorPartner Partner Nadir Godrej
ireena VittalGuy Lindsay Macintyre Crawford
Mumbai, May 30, 2014 Beejal Desai Vice President - Legal & Company Secretary
(Contd)
}
103
Notes to Financial Statements for the year ended March 31, 2014Note 1 : Corporate Information
The Indian Hotels Company Limited (“IHCL” or the “Company”), is a listed public limited company incorporated in 1902. It is promoted by Tata Sons Ltd., which holds a significant stake in the Company. The Company is primarily engaged in the business of owning, operating & managing hotels, palaces and resorts.
Note 2 : Significant Accounting Policies
These financial statements have been prepared in accordance with the generally accepted accounting principles in India (“Indian GAAP”) under the historical cost convention on an accrual basis. These financial statements have been prepared to comply in all material aspects with the Accounting Standards (AS) notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, (as amended)] (which continue to be applicable in respect of section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) and the other relevant provisions of the Companies Act, 1956. Current assets do not include elements which are not expected to be realised within 1 year and current liabilities do not include items which are due after 1 year, the period of 1 year being reckoned from the reporting date. The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous years.
The preparation of the financial statements requires the Management to make estimates and assumptions considered in the reported amounts of Assets and Liabilities (including Contingent Liabilities) as of the date of the financial statements and the reported income and expenses. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. The significant accounting policies adopted in the presentation of the financial statements are as under:-
(a) Revenue recognition :
Revenue is recognised upon rendering of the service, provided pervasive evidence of an arrangement exists, tariff / rates are fixed or are determinable and collectability is reasonably certain. Revenue comprises sale of rooms, food and beverages and allied services relating to hotel operations, including management and operating fees. Rebates and discounts granted to customers are reduced from revenue.
Interest
Interest income is accrued on a time proportion basis having regard to the amount outstanding and the rate applicable.
Dividend
Dividend income is recognised when the Company’s right to receive the payment is established.
(b) Employee Benefits (other than persons engaged through contractors):
i. Provident Fund
The eligible employees of the Company are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees’ salary (currently 12% of employees’ salary), which is recognised as an expense in the Statement of Profit and Loss during the period. The contributions as specified under the law are paid to the provident fund set up as irrevocable trust by the Company. The Company is generally liable for annual contributions and any shortfall in the fund assets based on the government specified minimum rates of return and recognises such contributions and shortfall, if any, as an expense in the year in which the corresponding services are rendered by the Company.
ii. Gratuity Fund
The Company makes annual contributions to Gratuity fund administered by the trustees for amounts notified by the funds. The Gratuity plan provides for lump sum payment to vested employees on retirement, death or termination of employment of an amount based on the respective employee’s last drawn salary and tenure of employment. The Company accounts for the net present value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method, carried out as at the Balance Sheet date. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
104
Notes to Financial Statements for the year ended March 31, 2014 iii. Post-Retirement Benefits
The net present value of the Company’s obligation towards post retirement pension scheme for retired whole time directors and post employment medical benefits to qualifying employees is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
iv. Superannuation
The Company has a defined contribution plan, wherein it annually contributes a sum equivalent to the eligible employee’s annual basic salary to a fund administered by the trustees. The Company recognises such contributions as an expense in the year in which the corresponding services are received from the employee.
The Company also has separate funded and unfunded schemes, which guarantee a minimum pension to certain categories of employees. The Company accounts for the net present value of its obligations therein, based on an independent actuarial valuation, carried out as at the Balance Sheet date, determined on the basis of the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
v. Compensated Absences
The Company has a scheme for compensated absences for employees, the liability for which is determined on the basis of an independent actuarial valuation, carried out at the Balance Sheet date.
vi. Other Employee Benefits
Other benefits, comprising of discretionary Long Service Awards and Leave Travel Allowances, are determined on an undiscounted basis and recognised based on the likely entitlement thereof.
(c) Fixed Assets:
i. Tangible Fixed Assets
Tangible fixed assets are stated at cost less depreciation/amortisation and impairment losses, if any. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs (refer note no. 2(l)). Trade discounts, rebates and benefits arising from utilisation of duty free scrips are deducted in determining the cost of purchase. Projects under which the tangible fixed assets are not yet ready for their intended use are carried as capital work-in-progress at cost determined as aforesaid.
ii. Intangible Fixed Assets
Intangible fixed assets include cost of acquired software and designs, and cost incurred for development of the Company’s website and certain contract acquisition costs. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use. Internally developed intangibles are capitalised if, and only if, all the following criteria can be demonstrated:
a) the technical feasibility and Company’s intention and ability of completing the project;
b) the probability that the project will generate future economic benefits;
c) the availability of adequate technical, financial and other resources to complete the project; and
d) the ability to measure the development expenditure reliably.
Expenditure on projects which are not yet ready for intended use are carried as intangible assets under development.
(d) Depreciation/Amortisation:
Depreciation on assets is provided at Straight Line Method (SLM) rates as specified in Schedule XIV to the Companies Act, 1956. In respect of Leasehold Land, depreciation is provided from the date the land is put to use for commercial operations, over the balance period of the lease. The renewal of these leases is considered as certain in view of past
105
Notes to Financial Statements for the year ended March 31, 2014experience for the purpose of depreciation of building on leased property. In respect of improvements to buildings, depreciation is provided based on its estimated useful life.
Intangible assets with finite lives are amortised over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation periods are reviewed and impairment evaluations are carried out at least once a year. The rates currently used for amortising intangible assets are as under:
Website Development Cost 20.00%
Cost of Customer Reservation System (including licensed software) 16.67%
Service & Operating Rights 10.00%
(e) Impairment of Assets:
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment of assets. If any indication of such impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount of these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and value in use. Value in use is arrived at by discounting the future cash flow to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased, a reversal of impairment loss is recognised.
(f) Foreign Currency Translation :
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period. With respect to long-term foreign currency monetary items that have not been hedged, from April 1, 2011 onwards, the Company has adopted the following policy:
• Foreignexchangedifferenceonaccountofadepreciableasset,isadjustedinthecostofthedepreciableasset,which would be depreciated over the balance life of the asset.
• Inothercases,theforeignexchangedifferenceisaccumulatedinaForeignCurrencyMonetaryItemTranslationDifference Account, and amortized over the balance period of such long-term asset/ liability.
A monetary asset or liability is termed as a long-term foreign currency monetary item, if the asset or liability is expressed in a foreign currency and has a term of 12 months or more at the date of origination of the asset or liability.
Exchange differences on restatement of other monetary items are recognised in the Statement of Profit and Loss.
Hedge Accounting
In accordance with its risk management policy, the Company has entered into cross currency swap transactions with a view to convert its Indian Rupee borrowings into Foreign Currency borrowings. To the extent the Company has designated the foreign currency component of the swap contracts as hedging instruments in a net investment hedging relationship applying hedge accounting principles (prior to the revision of Accounting Standard (AS) 11 on “The Effects of Changes in Foreign Exchange Rates” by notification no.G.S.R.914(E) dated 29th December, 2011), the exchange difference arising on translation of the borrowing so converted into a foreign currency liability, at the Balance Sheet date, that are designated and are effective hedges is recognised directly in the “Hedge Reserve” account under “Reserve and Surplus” (Note 4) and the ineffective portion is recognised immediately into the Statement of Profit and Loss. Hedge Accounting is discontinued when the hedging instrument expires or is exercised or cancelled or no longer qualifies for hedge accounting.
106
Notes to Financial Statements for the year ended March 31, 2014 Translation of Foreign Operations
Exchange differences on a monetary item that is receivable from or payable to foreign operations for which settlement is neither planned nor likely to occur in the foreseeable future which, in substance, forms a part of the Company’s net investment in that foreign operation, are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment. Upon disposal, such accumulation in the Foreign Currency Translation Reserve, or in the case of partial disposal, proportionate share of the related accumulated exchange difference, is recognised as income or as expense in the Statement of Profit and Loss. For this purpose, partial settlement of a monetary item, is considered to be a partial disposal.
The financial statements of an integral foreign operation are translated using the principles and procedures as if the transactions of the foreign operation are those of the Company itself.
(g) Assets taken on lease:
Operating lease payments are recognised as expenditure in the Statement of Profit and Loss on a straight line basis, unless another basis is more representative of the time pattern of benefits received from the use of the assets taken on lease.
(h) Inventories:
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realisable value. Cost include the cost of purchase including duties and taxes (other than those refundable), inward freight, and other expenditure directly attributable to the purchase. Trade discounts, rebates and benefits arising from utilisation of duty free scrips are deducted in determining the cost of purchase.
(i) Investments:
i. Long-term investments are carried at cost. Provision is made for diminution in value, other than temporary, on an individual basis.
ii. Current investments are carried at the lower of cost and fair value, determined on an individual basis.
(j) Taxes on income:
i. Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the prevailing tax laws. The differences between the taxable income and the net profit or loss before tax for the year as per the financial statements are identified and the tax effect of timing differences is recognised as a deferred tax asset or deferred tax liability. The tax effect is calculated on accumulated timing differences at the end of the accounting year, based on effective tax rates substantively enacted by the Balance Sheet date.
ii. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.
iii. Deferred tax assets, other than on unabsorbed depreciation and carried forward losses, are recognised only if there is reasonable certainty that they will be realised in the future and are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date. In situations where the Company has unabsorbed depreciation and carried forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that the same can be realised against future taxable profits. Deferred tax assets are reviewed at each Balance Sheet date for their realisability.
iv. Minimum Alternative Tax (“MAT”) credit is recognised as an asset only when and to the extent there is convincing evidence that the Company will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
107
Notes to Financial Statements for the year ended March 31, 2014(k) Accounting for Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognised in terms of Accounting Standard 29 – ‘Provisions, Contingent Liabilities and Contingent Assets’ (AS-29), notified by the Companies (Accounting Standards) Rules, 2006 (as amended), when there is a present legal obligation as a result of past events, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liabilities are recognised only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Company, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for. Contingent assets are not recognised in the financial statements.
(l) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. Debenture issue costs and the premium on redemption of debentures are adjusted against the available Securities Premium Account in accordance with the provisions of section 78 of the Companies Act, 1956. All other borrowing costs are charged to Statement of Profit and Loss over the tenure of the borrowing.
Interest Rate Swap Contracts entered into, to manage interest risks on borrowings, is accounted in the period in which it accrues as these contracts are intended to be held till the maturity of the underlying borrowings.
(m) Cash and Cash Equivalent (for the purpose of cash flow statement):
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
(n) Cash Flow Statement:
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Company are segregated based on the available information.
(o) Earnings Per Share:
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
(p) Liability for redeemable points earned by guests under the loyalty programme of the Company is accrued as an expenditure and is estimated on the redemption trends and the expected cost to be incurred in respect of the redeemable points.
108
Notes to Financial Statements for the year ended March 31, 2014Note 3 : Share Capital
March 31, 2014 March 31, 2013` crores ` crores
Authorised Share Capital Ordinary Shares100,00,00,000 Ordinary Shares of ` 1/- each 100.00 100.00 Preference Shares1,00,00,000 Cumulative Redeemable Preference Shares of ` 100/- each [Refer footnote (ii)]
100.00 100.00
200.00 200.00 Issued Share Capital
80,74,89,291 (Previous year - 80,74,89,291) Ordinary Shares of ` 1 /- each 80.75 80.75 80.75 80.75
Subscribed and Paid Up80,74,72,787 (Previous year - 80,74,72,787) Ordinary Shares of ` 1 /- each, Fully Paid 80.75 80.75(Refer Footnote (v)) 80.75 80.75
Footnotes :
(i) The Company has one class of equity shares having a par value of ` 1 per share. Each shareholder is eligible for one vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in case of interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
During the year ended March 31, 2014, no dividend is proposed as distribution to equity shareholders ( Previous year ` 0.80 per share).
(ii) The Board of Directors at its meeting held on March 27, 2014 has approved, subject to the approval of the shareholders of the Company, the re-classification of the Authorised Share Capital of the Company comprising ` 200 crores divided into 100,00,00,000 equity shares of ` 1 each and 1,00,00,000 cumulative redeemable preference shares of ` 100 each into 200,00,00,000 equity shares of ` 1 each aggregating to ` 200 crores.
(iii) Reconciliation of the shares outstanding at the beginning and at the end of the year
March 31, 2014 March 31, 2013
No. of shares ` crores No. of shares ` crores
As at the beginning of the year 80,74,72,787 80.75 75,94,72,787 75.95
Add : Issued during the year - - 4,80,00,000 4.80
As at the end of the year 80,74,72,787 80.75 80,74,72,787 80.75
(iv) Shareholders holding more than 5% shares in the Company :
March 31, 2014 March 31, 2013
No. of shares % of Holding No. of shares % of Holding
Equity shares of ` 1/- each fully paid
Tata Sons Limited 20,20,52,004 25.02 20,20,52,004 25.02
Life Insurance Corporation of India 6,77,97,250 8.40 7,68,79,324 9.52
Sir Dorabji Tata Trust 5,02,21,040 6.22 5,02,21,040 6.22
Government Pension Fund Global 4,04,54,747 5.01
(v) 16,504 (Previous year - 16,504) Ordinary Shares were issued but not subscribed to as at the end of the respective years and have been kept in abeyance pending resolution of legal dispute.
109
Notes to Financial Statements for the year ended March 31, 2014Note 4 : Reserves and Surplus
March 31, 2014 March 31, 2013` crores ` crores
Capital Reserve
Opening and Closing Balance 43.91 43.91
Capital Redemption Reserve
Opening and Closing Balance 1.12 1.12
Securities Premium Reserve
Opening Balance 2,095.14 1,667.09
Add : On allotment of shares on Warrant - 492.67
Less: Provision for Premium payable on redemption of Debentures (net of tax) - 63.66
Less : Issue expenses written off (net of tax) 0.14 0.96
Closing Balance 2,095.00 2,095.14
Debenture Redemption Reserve
Opening Balance 440.97 440.97
Less : Transfer to Statement of Profit and Loss (135.00) -
Closing Balance 305.97 440.97
Investment Reserve
Opening and Closing Balance 5.00 5.00
Investment Allowance Utilised Reserve
Opening and Closing Balance 4.03 4.03
Export Profits Reserve
Opening and Closing Balance 0.41 0.41
Hedge Reserve (Refer Footnote)
Opening Balance (176.90) (118.22)
Add : Exchange translation difference for the year (106.33) (58.68)
Closing Balance (283.23) (176.90)
Foreign Currency Translation Reserve
Opening Balance 278.57 215.90
Add : Exchange translation difference on net investment in non-integral foreign operations
Add : Exchange translation difference for the year (53.35) (33.71)
Less : Transferred to Statement of Profit and Loss on amortisation 22.16 9.25
Closing Balance (46.44) (15.25)
General Reserve
Opening and Closing Balance 484.61 484.61
Carried over 3002.57 3161.61
110
Notes to Financial Statements for the year ended March 31, 2014
March 31, 2014 March 31, 2013` crores ` crores
Brought over 3002.57 3161.61
Surplus in Statement of Profit and Loss
Opening Balance 65.29 422.67
Add : Transfer from Debenture Redemption Reserve 135.00 -
Less : Loss for the current year (590.49) (276.61)
Less : Dividend paid for previous year - (4.80)
Less : Tax on Dividend - (0.78)
Less : Proposed Dividend - (64.60)
Less : Tax on Dividend - (10.59)
Add : Tax credit for Dividend Distribution Tax 0.72 -
Closing Balance (389.48) 65.29
2,613.09 3,226.90
Footnote :
The Company has adopted hedge accounting principles to account for hedging of loans extended to subsidiaries forming a part of the Company’s net investment in non-integral foreign operations. Effectively, the Company had partially converted its rupee borrowings into foreign currency borrowings, using cross-currency swap derivative instruments, so as to cover the foreign currency fluctuations of its investments in overseas subsidiaries and the foreign currency borrowings.
On application of the hedge accounting policy, the foreign currency translation differences of both, the hedging instrument (i.e. the borrowings) and the hedged item (i.e. the net investment in non-integral foreign operation), are recognised under Reserves and Surplus having due consideration to hedge effectiveness. Accordingly, the translation difference on the borrowings amounting to ` 106.33 crores (Previous Year ` 58.68 crores) for year ended March 31, 2014 forming the effective portion of the hedge has been recognised in the Hedge Reserve Account in the Balance Sheet, whilst the corresponding translation differences of the net investment in non-integral foreign operation of ` 113.62 crores (Previous Year ` 62.67 crores) for the year ended March 31, 2014 has been recognised under “Foreign Currency Translation Reserve Account” in the Balance Sheet.
586.00 150.00 736.00 - Term Loan from Banks (Unsecured) (Refer Footnote (iv))Foreign Currency Term Loan From Banks 570.10 - 515.90 - Term Loan From Bank - 100.00 - -
- - - 0.60Loans and Advances (Unsecured)From Related Party 3.72 - 3.37 - Liability on currency swap contracts (Refer Footnote (v)) 203.69 65.50 162.86 -
207.41 65.50 166.23 -
2,153.51 375.50 2,268.13 60.60
(ii) Secured Debentures include:
a) 3,000, 10.10% Secured Non-Convertible Debentures of ` 10 lakhs each aggregating ` 300 crores, are allotted on November 18, 2011 and repayable at par at the end of 10th year from the date of allotment i.e November 18, 2021.
b) 2,500, 9.95% Secured Non-Convertible Debentures of ` 10 lakhs each aggregating ` 250 crores, are allotted on July 27, 2011 and repayable at par at the end of 10th year from the date of allotment i.e July 27, 2021.
c) 3,000, 2% Secured Non-Convertible Debentures of ` 10 lakhs each aggregating ` 300 crores, are allotted on March 22, 2010 and repayable in 3 annual instalments commencing at the end of 5th, 6th & 7th year from the date of allotment along with redemption premium of ` 6.13 lakhs per debenture in the ratio of 20:30:50 so as to give a yield to maturity of 9.50%.
d) 3,000, 11.80% Secured Non-Convertible Debentures of ` 10 lakhs each aggregating ` 300 crores, allotted on December 18, 2008 and repayable in 3 annual instalments in the ratio of 50:30:20 at the end of the 3rd year from the date of allotment. During the year, the Company has repaid the third instalment which was due on December 18, 2013 of ` 60 crores.
All the Secured Non-Convertible Debentures are rated, listed and secured by a pari passu first charge created on all the fixed assets of the Company, both present and future.
112
Notes to Financial Statements for the year ended March 31, 2014(iii) Unsecured Debentures include:
a) 2,500, 2% Unsecured Non-Convertible Debentures of ` 10 lakhs each, allotted on December 9, 2009 aggregating ` 250 crores and repayable at the end of the 10th year, along with redemption premium of ` 12.43 lakhs per debenture.
b) 1,360, 9.90% Unsecured Non-Convertible Debentures of ̀ 10 lakhs each, allotted on February 24, 2012 aggregating ` 136 crores and repayable at the end of the 5th year from the date of allotment.
c) 1,500, 2% Unsecured Non-Convertible Debentures of ` 10 lakhs each, allotted on December 9, 2009 aggregating ` 150 crores and repayable at the end of the 5th year, along with redemption premium of ̀ 4.37 lakhs per debenture.
d) 2,000, 2% Unsecured Non-Convertible Debentures of ` 10 lakhs each, allotted on April 23,2012 aggregating ` 200 crores and repayable at the end of the 5th year from the date of allotment, along with redemption premium of ` 4.71 lakhs per debenture.
(iv) Term Loan from Banks (Unsecured) include:
a) External commercial borrowing of US $ 95 million taken on November 23, 2011. The loan is repayable at the end of 50th, 60th, and 72nd month from November 23, 2011 in equal instalments to achieve the average maturity of 5.05 years and carries an interest based on spread over LIBOR.
b) Unsecured term loan from a bank of ` 100 crores taken on August 26,2013 for 3 years carrying interest rate of 11.50% p.a. The loan has a put and call option at the end of 18 months. In view of put option available with the bank, which can be exercised by the bank at the end of 18 months, i.e., on February 26, 2015, the loan has been classified under current maturities of long-term borrowings.
(v) The Company enters into cross currency swap contracts as a part of its risk management strategy. At the reporting date, the notional amounts are restated at the closing exchange rates. As at March 31, 2014, the difference aggregating ` 269.19 crores (Previous Year ` 162.86 crores) on restatement represents a liability which is classified as “unsecured loans and advances”.
(vi) Maturity Profile of Debentures :
` croresa) Non-Current Non-Convertible Debentures (NCDs) Redeemable on Principal Premium Total Secured a) 10.10% Non-Convertible Debentures November 18, 2021 300.00 - 300.00 b) 9.95% Non-Convertible Debentures July 27, 2021 250.00 - 250.00 c) 2% Non-Convertible Debentures (3rd instalment) March 22, 2017 150.00 105.25 255.25
Unsecured a) 2% Non-Convertible Debentures December 9, 2019 250.00 310.84 560.84 b) 9.90% Non-Convertible Debentures February 24, 2017 136.00 - 136.00 c) 2% Non-Convertible Debentures April 23, 2017 200.00 94.23 294.23
586.00 405.07 991.07
1376.00 561.82 1937.82
b) Current Non-Convertible Debentures (NCDs) Redeemable on Principal Premium Total Secured a) 2% Non-Convertible Debentures (1st instalment) March 22, 2015 60.00 27.22 87.22
60.00 27.22 87.22 Unsecured a) 2% Non-Convertible Debentures December 9, 2014 150.00 65.46 215.46
150.00 65.46 215.46
210.00 92.68 302.68
113
Notes to Financial Statements for the year ended March 31, 2014Note 6 : Deferred Tax Liabilities (net)
March 31, 2014 March 31, 2013` crores ` crores
Deferred tax liabilities:
Depreciation on fixed assets 268.44 273.42
Unamortised borrowing costs 1.62 2.07
Total (A) 270.06 275.49
Deferred tax assets:
Provision for doubtful debts 2.71 2.93
Premium on redemption of Debentures 123.75 148.93
Provision for Employee Benefits 13.01 13.81
Others 23.43 14.32
Total (B) 162.90 179.99
Net Deferred tax liabilities (A-B) 107.16 95.50
Footnote:
Deferred Tax Assets of ` Nil (Previous year - ` 25.86 crores) has been adjusted against Securities Premium Reserve
Note 7 : Other Long-term Liabilities
March 31, 2014 March 31, 2013` crores ` crores
Creditors for capital goods and services 3.77 3.13
Deposits from others
Secured (Refer Note 15 Footnote (iv)) 71.10 71.10
Unsecured 2.48 0.52
73.58 71.62
77.35 74.75
Note 8 : Long-term Provisions
March 31, 2014 March 31, 2013` crores ` crores
Provision For Employee Benefits
Compensated absences 10.26 11.72
Post-employment medical benefits 2.50 2.63
Post-retirement pension 6.50 5.57
19.26 19.92
Provision - Others
Premium on Redemption of Debentures (Refer Note 5 Footnote (vi)(a)) 561.82 654.50
581.08 674.42
114
Notes to Financial Statements for the year ended March 31, 2014Note 9 : Short-term Borrowings
March 31, 2014 March 31, 2013` crores ` crores
Loans repayable on demand
From Bank
Secured (Refer Footnote (i)) 9.34 -
Unsecured 2.25 -
11.59 -
Other Short-term Loans
From Related Parties
Unsecured (Refer Footnote (ii)) - 45.00
From Bank
Unsecured (Refer Footnote (iii)) 150.00 -
From Others
Unsecured (Refer Footnote (iv)) - 148.54
150.00 193.54
161.59 193.54
Footnotes :
(i) Secured loan from Bank consists of overdraft facilities. These are secured by hypothecation of operating supplies, stores, food and beverages and receivables.
(ii) Short-term loans from related parties for the previous year consisted of inter-corporate deposits for a period of 90 days with an option of pre-payment , which have been repaid during the year.
(iii) The Company had taken an unsecured short term loan from a bank of ` 200 crores carrying interest rate of 10.35% p.a. during the year. The loan was drawn down in tranches of ` 100 crores each on July 25, 2013 and July 30, 2013 with a put / call option at the end of six months from the draw down date. The Company has repaid ` 50 crores on March 27, 2014. The outstanding as on March 31, 2014 is ` 150 crores.
(iv) Short-terms loans from others for the previous year consisted of commercial paper issued, which has been repaid during the year.
Note 10 : Trade Payables
March 31, 2014 March 31, 2013
` crores ` crores
Trade Payables
Micro and Small Enterprises ( Refer Footnote (i) and (ii) ) 1.23 1.71
Vendor Payables 90.97 83.17
Accrued expenses and others 81.28 66.76
173.48 151.64
Footnotes :
(i) The amount due to Micro and Small Enterprises as defined in the “The Micro, Small and Medium Enterprises Development Act, 2006” has been determined to the extent such parties have been identified on the basis of information collected by the Management. This has been relied upon by the auditors.
115
Notes to Financial Statements for the year ended March 31, 2014(ii) The disclosures relating to Micro and Small Enterprises are as under:
March 31, 2014 March 31, 2013` crores ` crores
(a) The principal amount remaining unpaid to supplier as at the end of the accounting year 1.20 1.71
(b) The interest due thereon remaining unpaid to supplier as at the end of the accounting year 0.03 -
(c) The amount of interest paid in terms of Section 16, along with the amount of payment made to the supplier beyond the appointed day during the year - -
(d) The amount of interest due and payable for the period of delay in making payment ( which have been paid but beyond the appointed day during the year) but without adding the interest specified under this Act - -
(e) The amount of interest accrued during the year and remaining unpaid at the end of the accounting year 0.03 -
(f) The amount of further interest due and payable even in the succeeding year, until such date when the interest dues as above are actually paid - -
Note 11 : Other Current LiabilitiesMarch 31, 2014 March 31, 2013
` crores ` croresCurrent maturities of long-term borrowings (Refer Note 5 Footnote (i)) Debentures 210.00 60.00 Term Loans 100.00 -
375.50 60.60 Payables on Current Account dues : Related Parties 10.27 19.14 Others 14.61 11.08
24.88 30.22 Deposits (Unsecured) 22.96 19.66 Interest accrued but not due on borrowings 40.40 40.01 Income received in advance 12.40 15.29 Advances collected from customers 34.09 36.93 Creditors for capital expenditure 19.46 10.22 Unclaimed dividend (Refer Footnote (i)) 3.07 3.15 Unclaimed Share Application Money (Refer Footnote (i)) 0.06 0.13
Unclaimed Matured Deposits and interest accrued thereon (Refer Footnote (i)) 2.07 2.68 Unclaimed Matured Debentures and interest accrued thereon ` 25,127 (Previous Year - ` 25,127) (Refer Footnote (i))
- -
Other Liabilities (Refer Footnote (ii)) 98.21 96.57 633.10 315.46
Footnotes :
(i) A sum of ` 0.29 crore (Previous year ` 0.24 crore) due for transfer to the Investor Education and Protection Fund during the year has been transferred and there are no dues in this respect which have remained unpaid as at the Balance Sheet date.
(ii) Other liabilities include accruals related to employee benefits ` 66.18 crores (Previous Year ` 66.15 crores).
116
Notes to Financial Statements for the year ended March 31, 2014
Note 12 : Short-term Provisions
March 31, 2014 March 31, 2013
` crores ` crores
Provision for Employees Benefits
Compensated absences 17.54 17.44
Post-employment medical benefits 0.24 0.23
Post-retirement pension 3.97 6.16
21.75 23.83
Provision - Others
Provision for Contingencies (Refer Footnote (i)) 52.65 30.12
Provision for Premium on redemption of Debentures (Refer Note 5 Footnote (vi)(b))
92.68 -
163.51 120.47
185.26 144.30
Footnotes :
(i) Provision for Contingencies include :
Opening Balance Addition / (Deletion)
Closing Balance
` crores ` crores ` crores
Legal and Statutory matters 1.18 19.47 20.65
1.44 (0.26) 1.18
Contractual matters in the course of business 27.71 3.06 30.77
10.16 17.55 27.71
Employee related matters 1.23 - 1.23
1.23 - 1.23
Total 30.12 22.53 52.65
12.83 17.29 30.12
a) The above matters are under litigation / negotiation and the timing of the cash flows cannot be currently determined.
b) Figures in italics are in respect of previous year.
(ii) Details of Provision for Loyalty Programmes :
March 31, 2014 March 31, 2013` crores ` crores
Opening Balance 15.16 15.41 Less : Redeemed during the year 11.45 11.21
3.71 4.20 Add : Provision during the year 14.47 10.96 Closing Balance 18.18 15.16
117
Notes to Financial Statements for the year ended March 31, 2014Note 13 : Tangible Assets (Owned)
(` crores)
Freehold Land
Leasehold Land
Buildings(Refer
Footnote (i) & (ii))
Plant and Equipment
Furniture & Fixtures
Office Equipment
Vehicles Total
Gross Block at Cost
At April 1, 2012 135.95 11.83 1,157.54 970.43 426.40 80.43 15.53 2,798.11
Additions - - 10.28 22.35 6.48 1.77 0.25 41.13
Disposals - - 0.36 6.66 3.98 1.98 0.30 13.28
At March 31, 2013 135.95 11.83 1,167.46 986.12 428.90 80.22 15.48 2,825.96
Additions 1.26 - 14.49 21.81 5.33 7.60 0.41 50.90
Adjustments - - 0.16 (0.17) - 0.01 - -
Disposals - - 0.12 7.69 3.01 2.36 1.40 14.58
At March 31, 2014 137.21 11.83 1,181.99 1,000.07 431.22 85.47 14.49 2,862.28
Depreciation (Refer Footnote (ii))
At April 1, 2012 3.88 1.03 195.07 456.65 252.34 55.46 7.13 971.56
Charge for the year - 0.16 29.12 54.44 27.98 7.54 1.43 120.67
- - 0.13 5.80 3.44 1.92 0.28 11.57
At March 31, 2013 3.88 1.19 224.06 505.29 276.88 61.08 8.28 1,080.66
Charge for the year - 0.07 30.18 53.63 24.75 7.28 0.93 116.84
(Refer Footnote (iii))
Adjustments - - - - 0.01 (0.01) - -
Disposals - - 0.03 6.65 2.95 2.13 1.11 12.87
At March 31, 2014 3.88 1.26 254.21 552.27 298.69 66.22 8.10 1,184.63
Net Block
At March 31, 2013 132.07 10.64 943.40 480.83 152.02 19.14 7.20 1,745.30
At March 31, 2014 133.33 10.57 927.78 447.80 132.53 19.25 6.39 1,677.65
Footnotes :
(i) Gross Block includes buildings constructed on leasehold land and improvements thereto - ` 611.95 crores (Previous year - ` 599.92 crores).
(ii) Accumulated Depreciation includes adjustment for impairment made in earlier years of ` 6.61 crores (Previous year ` 6.61 crores), including ` 3.88 crores (Previous year ` 3.88 crores) on Freehold Land.
(iii) Depreciation charge for the year includes ` 0.04 crore (Previous year ` 0.04 crore) which is capitalised during the year.
118
Notes to Financial Statements for the year ended March 31, 2014Note 14 : Intangible Assets (Acquired)
(` crores)
Website Development
Cost
Software (Refer Footnote)
Service & Operating
Rights
Total
Gross Block at Cost
At April 1, 2012 4.07 19.15 9.33 32.55
Additions - 0.71 2.72 3.43
Disposals - 0.29 - 0.29
At March 31, 2013 4.07 19.57 12.05 35.69
Additions 0.74 13.10 0.22 14.06
Disposals - 0.76 1.00 1.76
At March 31, 2014 4.81 31.91 11.27 47.99
Amortisation
At April 1, 2012 1.34 11.47 7.54 20.35
Charge for the year 0.81 2.79 0.79 4.39
Disposals - 0.21 - 0.21
At March 31, 2013 2.15 14.05 8.33 24.53
Charge for the year 0.84 3.75 0.87 5.46
Disposals - 0.76 1.00 1.76
At March 31, 2014 2.99 17.04 8.20 28.23
Net Block
At March 31, 2013 1.92 5.52 3.72 11.16
At March 31, 2014 1.82 14.87 3.07 19.76
Footnote :
Software includes Customer Reservation System and other Licensed software.
119
Notes to Financial Statements for the year ended March 31, 2014Note 15 : Non-current Investments (at cost)
March 31, 2014 March 31, 2013Holdings Holdings
Face Value As at ` crores As at ` croresTrade Investments : Fully Paid Unquoted Equity Instruments Investments in Subsidiary CompaniesInternational Hotel Management Services Inc. (includes ` 1,990.70 crores (Previous year ` 1,925.81 crores) by way of additional paid-in capital) US $ 1 100 2,002.03 100 1,937.14KTC Hotels Ltd. ` 10 6,04,000 0.70 6,04,000 0.70Residency Food & Beverages Ltd. ` 10 1,85,00,000 18.25 1,85,00,000 18.25 Roots Corporation Ltd. ` 10 5,10,00,000 51.00 5,10,00,000 51.00Taj International Hotels (H.K.) Ltd. US $ 1 23,00,00,000 1,111.05 23,00,00,000 1,111.05Taj SATS Air Catering Ltd. ` 10 88,74,000 61.82 88,74,000 61.82TIFCO Holdings Ltd. ` 10 8,15,00,000 81.50 8,15,00,000 81.50United Hotels Ltd. ` 10 25,18,320 1.11 25,18,320 1.11 Piem Hotels Ltd. ` 10 9,86,760 61.12 9,86,760 61.12 Ideal Ice & Cold Storage Co. Ltd. ` 10 1,07,224 0.06 1,07,224 0.06 Inditravel Ltd. ` 10 2,40,004 0.24 2,40,004 0.24 Taj Enterprises Ltd. ` 100 7,000 0.07 7,000 0.07 Taj Rhein Shoes Co. Ltd. ` 100 45,000 0.45 45,000 0.45 Taj Trade & Transport Co. Ltd. ` 10 12,54,000 2.67 12,54,000 2.67
3,392.07 3,327.18
Investments in Jointly Controlled EntitiesIHMS Hotels (SA) (Proprietary) Ltd. (` 3,052) ZAR 1 500 - 500 - Share application money with IHMS Hotels (SA) (Proprietary) Ltd. pending for allotment (including ` 14.61 crores during the year) 57.09 42.48 Taj Karnataka Hotels & Resorts Ltd. ` 10 5,00,000 0.50 5,00,000 0.50 Taj Kerala Hotels & Resorts Ltd. ` 10 1,41,51,663 15.67 1,41,51,663 15.67 Taj Madras Flight Kitchen Pvt. Ltd. ` 10 79,44,112 8.56 79,44,112 8.56 Taj Safaris Ltd. ` 10 59,16,667 7.92 59,16,667 7.92 TAL Hotels & Resorts Ltd. US$ 1 13,29,778 13.63 13,29,778 13.63 Kaveri Retreats and Resorts Ltd. ` 10 20,00,000 6.80 20,00,000 6.80
Investment in Other CompaniesTourism Finance Corporation of India Ltd. ` 10 50,000 0.10 50,000 0.10 India Tourism Development Corporation Ltd. ` 10 67,50,275 44.58 67,50,275 44.58
44.68 44.68
Total Trade Investment 3,838.59 3,759.09
Non-trade Investments - Long TermInvestment in Equity InstrumentsHDFC Bank Ltd. (quoted) (` 5,000/-) ` 2 2,500 - 2,500 -
: Market Value 292.22 220.35 (ii) Aggregate of Unquoted Investments - Gross : Cost 3,705.43 3,625.93
(iii) The Board of Directors at its meeting held on November 8, 2013 decided not to pursue the offer made for acquisition of Orient-Express Hotels Limited and in view of the above, the Company reviewed its carrying value of long term investments and considered it prudent to recognise a further diminution, other than temporary, during the quarter ended September 30, 2013, of ` 287 crores in its investment in Taj International Hotels (H.K.) Ltd (a wholly owned subsidiary), which in turn holds investments in the Company’s various international entities, one of which holds its investment in Orient-Express Hotels Limited.
The performance of the long-term investments of the Company were being monitored by the Company on a continuous basis and further, at a meeting of the Board of Directors held on March 11, 2014, a review was undertaken of adjustments necessary to the carrying values of these investments and based on conclusions reached, the Company has recognised a further diminution, other than temporary, during the quarter ended March 31, 2014, of ` 400 crores, which primarily comprises of diminution in its investment in International Hotel Management Services Inc (a wholly owned subsidiary that holds the Company’s assets in the United State of America) as also a diminution in its investment in Taj International Hotels (H.K.) Ltd (a wholly owned subsidiary) on account of the latter’s financial exposures.
The above charges to the Statement of Profit & Loss have been classified as an “Exceptional item” for the current year.
(iv) Transfer of shares is restricted due to option granted for 10 years upto July, 2021 to Tata Realty and Infrastructure Ltd. for repurchase of the shares at par value. Tata Realty and Infrastructure Ltd. has deposited a sum of ` 71.10 crores (Previous Year ` 71.10 crores) as Option Deposit, which shall be adjusted upon exercise of the option or refunded.
121
Notes to Financial Statements for the year ended March 31, 2014
Note 16 : Long-term Loans and Advances
March 31, 2014 March 31, 2013
` crores ` crores
(Unsecured, considered good unless stated otherwise)
Capital advances 22.80 36.35
Long-term security deposits placed for Hotel Properties
External parties 118.44 117.05
Related parties 3.50 3.50
121.94 120.55
Deposits with Public Bodies and Others 47.17 29.73
Loans and advances to related parties (Refer Footnote)
Subsidiary Companies (net) 1,221.71 1,105.56
Jointly Controlled Entities 14.35 13.50
Associates 8.04 -
1,244.10 1,119.06
Other loans and advances
Advance Income Tax paid (net) 76.09 78.82
MAT credit entitlement 33.31 48.67
Others 9.31 7.84
118.71 135.33
1,554.72 1,441.02 Footnote :Loans and advances to related parties include long-term shareholders’ deposits placed by the Company with its overseas subsidiaries and jointly controlled entities.
4.70 12.36 Note 18 : Inventories (At lower of cost and net realisable value)
March 31, 2014 March 31, 2013
` crores ` crores
Food and Beverages 19.06 17.52
Stores and Operating Supplies 21.12 20.85
40.18 38.37
122
Notes to Financial Statements for the year ended March 31, 2014
Note 19 : Trade Receivables
March 31, 2014 March 31, 2013
` crores ` crores
(Unsecured) (Refer Footnote)
Outstanding over six months from the date they were due for payment:
Considered good 12.61 10.25
Considered doubtful 7.98 8.61
20.59 18.86
Others :
Considered good 111.80 114.97
Considered doubtful - 0.01
111.80 114.98
132.39 133.84
Less : Provision for Doubtful Debts 7.98 8.62
124.41 125.22
Footnote :
Trade Receivables include debts due from Directors - ` 1,82,699 (Previous year - ` 12,151) in the ordinary course of business.
Note 20 : Cash and Bank Balances
March 31, 2014 March 31, 2013
` crores ` crores
Cash and Cash Equivalents
Cash on hand 2.21 2.07
Cheques, Drafts on hand 19.44 3.79
Balances with bank in current account 7.10 28.38
Balances with bank in call and short-term deposit accounts (original maturity less than 3 months) 9.52 0.58
38.27 34.82
Other Balances with banks
Call and Short-term deposit 0.34 9.96
Deposits pledged with others 0.61 1.08
Margin money deposits 0.94 0.65
Earmarked balances 4.25 4.42
6.14 16.11
Total Cash and Bank Balances 44.41 50.93
Less : Term deposit with banks maturing after 12 months from Balance Sheet date and other earmarked / margin money / pledged deposits classified as non-current (Refer Note 17) 1.24 1.97
43.17 48.96
123
Notes to Financial Statements for the year ended March 31, 2014
Note 21 : Short-term Loans and AdvancesMarch 31, 2014 March 31, 2013
` crores ` crores(Unsecured, considered good unless stated otherwise) Short-term Loans and Advances
Related Parties Jointly Controlled Entities - 9.90 Associates - 8.04
- 17.94 Others 0.33 0.94
0.33 18.88
Deposit with Public Bodies and Others 8.45 5.36
Other Advances Considered good 58.89 57.86 Considered doubtful 2.56 2.15
61.45 60.01 Less : Provision for doubtful Advances 2.56 2.15
58.89 57.86
67.67 82.10
Note 22 : Other Current Assets
March 31, 2014 March 31, 2013
` crores ` crores
Interest Receivable
Related Parties 2.05 2.56
Others 13.23 14.67
15.28 17.23
On Current Account dues
Related Parties 16.66 15.23
Others 7.34 8.75
24.00 23.98
Unamortised Borrowing Costs
Opening Balance 6.09 7.45
Add : Additions during the year 0.03 0.12
Less : Amortised during the year (Refer Footnote) 1.35 1.48
Represents expenses on loans amortised over the tenure of the loan.
124
Notes to Financial Statements for the year ended March 31, 2014Note 23 : Rooms, Restaurants, Banquets and Other Operating Income
March 31, 2014 March 31, 2013
` crores ` crores
Room Income 884.26 889.25Food, Restaurants and Banquet Income 774.16 732.37Shop rentals 28.94 26.21Membership fees 53.93 52.57Management and operating fees 125.93 116.52Others 62.29 58.94
1,929.51 1,875.86
Note 24 : Other IncomeMarch 31, 2014 March 31, 2013
` crores ` croresInterest Income
Inter-corporate deposits - 0.15 Deposits with banks 1.41 2.06 Deposits with related parties 2.17 1.95 Interest on Income Tax Refunds 3.02 0.06 Others 1.01 1.57
7.61 5.79 Dividend Income from Long - term Investments
From related parties (including Dividend from Subsidiaries ` 14.40 crores (Previous year ` 9.18 crores))
21.07 17.30
From others 0.84 1.63 Dividend Income from other Current Investments
From others 0.64 4.45 Profit on sale of Investments (Net)
From current investment - 0.49Others 17.66 19.27
47.82 48.93
Note 25 : Food and Beverages Consumed
March 31, 2014 March 31, 2013
` crores ` crores
Opening Stock 17.52 20.15
Add : Purchases 178.37 161.45
195.89 181.60
Less : Closing Stock 19.06 17.52
Food and Beverages Consumed 176.83 164.08
March 31, 2014 March 31, 2013
` crores % ` crores %
Imported 11.02 6.23 14.68 8.95
Indigenous 165.81 93.77 149.40 91.05
176.83 100.00 164.08 100.00
125
Notes to Financial Statements for the year ended March 31, 2014Note 26 : Employee Benefit Expense and Payment to Contractors
March 31, 2014 March 31, 2013` crores ` crores
Salaries, Wages, Bonus etc. 348.65 341.07 Company's Contribution to Provident and Other Funds (Refer Note 36) 19.91 28.21 Reimbursement of Expenses of Personnel Deputed to the Company 10.55 14.77 Payment to Contractors 32.24 29.51 Staff Welfare Expenses 61.18 63.17 Total 472.53 476.73
Note 27 : Finance CostsMarch 31, 2014 March 31, 2013
` crores ` croresInterest Expense on borrowings 143.69 146.53 On Tax Demands 2.84 6.57
146.53 153.10 Other borrowing costs 1.35 1.48 Less : Interest recovered on related currency swaps 30.30 34.13 Less : Interest capitalised (Refer Footnote) 18.76 15.25
98.82 105.20
Footnote :The Company has capitalised the Interest cost on borrowings relating to assets in Capital Work in Progress.
Note 28 : Other Operating and General ExpensesMarch 31, 2014 March 31, 2013
` crores ` crores(i) Operating Expenses consist of the following :
Linen and Room Supplies 29.72 28.62 Catering Supplies 17.13 16.68 Other Supplies 3.66 3.67 Fuel, Power and Light 165.70 157.25 Repairs to Buildings 31.92 25.86 Repairs to Machinery 38.14 28.50 Repairs to Others 11.45 19.26 Linen and Uniform Washing and Laundry Expenses 10.45 10.12 Payment to Orchestra Staff, Artistes and Others 23.70 21.00 Guest Transportation 17.54 15.28 Travel Agents' Commission 25.18 20.90 Discount to Collecting Agents 16.75 17.94 Other Operating Expenses 35.62 33.35
426.96 398.43
Linen, Room, Catering and Other Supplies ConsumedMarch 31, 2014 March 31, 2013
Notes to Financial Statements for the year ended March 31, 2014
(ii) General Expenses consist of the following:
March 31, 2014 March 31, 2013
` crores ` crores
Rent 40.10 39.86
Licence Fees 125.74 127.69
Rates and Taxes 36.76 29.04
Insurance 6.04 7.18
Advertising and Publicity 92.29 84.40
Printing and Stationery 7.28 7.05
Passage and Travelling 10.31 10.52
Provision for Doubtful Debts (Refer Footnote (v)) 1.08 0.70
Professional Fees 38.82 36.23
Outsourced Support Services 39.52 31.02
Exchange Loss (Net) 1.50 0.51
Loss on Sale of Fixed Assets (Net) 1.26 0.40
Payment made to Statutory Auditors (Refer Footnote (iv)) 3.08 2.67
Directors' Fees and Commission 2.04 1.86
Other Expenses (Refer Footnote (iii)) 57.91 53.08
463.73 432.21
890.69 830.64
Footnotes :(i) Expenditure recovered from other parties :
March 31, 2014 March 31, 2013
` crores ` crores
Fuel, Power and Light 4.59 3.54 Repairs to Buildings 0.07 0.22 Repairs to Machinery - 0.01 Linen and Uniform Washing 1.39 1.27 Rent 0.28 0.52 Other Expenses 2.01 1.30
8.34 6.86
(ii) The following direct expenses incurred during the year and to the extent attributable to construction or renovation of hotel buildings have been capitalised :
March 31, 2014 March 31, 2013
` crores ` crores
Employee benefits expense 1.26 0.96
Rent, Rates and Taxes 2.49 1.11
Fuel, power and light 0.90 0.28
Depreciation 0.04 0.04
Other expenses (Net) 4.20 3.14
8.89 5.53
(iii) Other expenses include Advances written off – ` 1.03 crores (Previous year - ` 1.57 crores)
127
Notes to Financial Statements for the year ended March 31, 2014
(iv) Payment made to Statutory Auditors :
March 31, 2014 March 31, 2013
` crores ` crores
As auditors 2.08 1.80
As tax auditors 0.25 0.20
For Company Law matters - ` NIL (Previous year - ` 75,000) - 0.01
For other services 0.74 0.53
For out-of pocket expenses 0.01 0.13
Service tax on above [Net of credit availed - ` 0.38 crore (Previous year - ` 0.33 crore)]
3.08 2.67
Footnote:
Excludes ` 0.14 crore adjusted against Securities Premium Account
(v) Provision for Doubtful Debts :
March 31, 2014 March 31, 2013
` crores ` crores
Opening Balance 8.62 9.22
Add : Provision during the year 1.27 1.35
9.89 10.57
Less : Bad debts written off against past provisions 1.72 1.30
Less : Provision no longer required, written back 0.19 0.65
Closing Balance 7.98 8.62
Note 29 : Exceptional ItemsMarch 31, 2014 March 31, 2013
` crores ` crores
Exceptional Items comprises of the following :
Exchange Loss on long-term borrowings/assets (Refer Footnote) (22.16) (9.25)
Expenditure on a discontinued project charged off for commercial reasons (8.90) -
Provision for Contingency for Property tax (19.04) -
Provision for Diminution in value of long-term investments (Refer Note no 15(iii) ) (687.00) (373.00)
Provision for Obligation of an Associate - (27.55)
Total (737.10) (432.91)
Footnote :
Exchange difference on revaluation of long-term foreign currency monetary items.
128
Notes to Financial Statements for the year ended March 31, 2014Note 30 : Contingent Liabilities (to the extent not provided for) :
(a) On account of Income Tax matters in dispute :
In respect of tax matters for which Company’s appeals are pending - ` 48.52 crores (Previous year - ` 60.12 crores).The said amounts have been paid / adjusted and will be recovered as refund if the matters are decided in favour of the Company.
The Company is a defendant in various legal actions and a party to claims as above, plus interest thereon, which arose during the ordinary course of business. The Company’s management believes based on the facts presently known, that the results of these actions will not have a material impact on the Company’s financial statements. It is not practicable for the Company to estimate the timings of cash flows, if any, in respect of the above.
(c) In respect of a plot of land provided to the Company under a license agreement, on which the Company has constructed a hotel, the licensor has made a claim of ` 229.70 crores to date, (13 times the existing annual rental) for increase in the rentals with effect from 2006-07. The Company believes these claims to be untenable. The Company has contested the claim, based upon legal advice, by filing a suit in the Honourable Bombay High Court on grounds of licensor’s inconsistent stand on automatic renewal of lease, levy of lease rentals and method of computing such lease rent, based on the existing license agreement as also a Supreme Court judgment on related matters. Even taking recent enactments into consideration, in the opinion of the Company, the computation cannot, under any stretch, be more than ` 48.56 crores (excluding interest / penalty), and this too is being contested by the Company on merit.
Further, a “Notice of Motion” has been issued by the Honourable Bombay High Court, inter alia, for a stay against any further proceedings by the licensor, pending a resolution of this dispute by the Honourable Bombay High Court. In view of this, and based on legal advice, the Company regards the likelihood of sustainability of the lessor’s claim to be remote and the amount of any potential liability, if at all, is indeterminate.
In some hotels, proposed revisions in property taxes are contested by the Company, amounts of which are indeterminate..
(d) Guarantees/Letter of Comfort given by the Company in respect of loans obtained by other companies and outstanding as on March 31, 2014 - ` 972.00 crores (Previous year - ` 868.68 crores).
Note 31 : Capital Commitments
Estimated amount of contracts remaining to be executed on capital account net of capital advances and not provided for is ` 125.92 crores (Previous year – `173.75 crores).
Note 32 : Other Commitments
(a) The Company owns 19.90% of the issued share capital of Lands End Properties Private Limited (LEPPL), a Company owning 67% interest in the erstwhile Sea Rock hotel property through its wholly-owned subsidiary, Sky Deck Properties & Developers Private Limited (SDPDPL). LEPPL has issued Zero coupon Non-Convertible Debentures aggregating to ` 521 crores, redeemable at a premium, having a yield to maturity of 10% per annum. LEPPL has a call option on this borrowing, and thus the right to early redemption of such Debentures on February 13, 2015 with an additional redemption premium of 0.15% of nominal value (principal value). In the event, this option of early redemption is not exercised by LEPPL, the obligation of LEPPL on such Debentures, on its maturity, would aggregate to ` 693.45 crores. However, the call option can only be exercised with prior written consent from the Company.
In respect of such debentures issued by LEPPL, the Company has:-
i. the first right to purchase the entire shareholding of SDPDPL held by LEPPL for an aggregate value of ` 693.45 crores; or
129
Notes to Financial Statements for the year ended March 31, 2014 ii. the obligation to make good the value of the shortfall, if any, if lenders of LEPPL divest 100% of SDPDPL shares and
realise an amount lower than the redemption amount, in case the right referred in (i) above is not exercised.
In addition, SDPDPL has availed of a secured zero coupon term loan of ` 508 crores from a financial institution for which the total repayment obligation on the maturity date (being January 28, 2016) would be ` 708.93 crores. This term loan has been secured by way of a pledge on all direct and indirect shareholding of ELEL.
In effect, the total future repayment obligation for LEPPL, on a consolidated basis, aggregates to ` 1402.38 crores covering the current outstanding debt obligations of LEPPL and SDPDPL, its underlying subsidiary.
(b) The Company had given an option to certain shareholders of ELEL Hotels & Investment Ltd. (ELEL), a company having an underlying lease of the Hotel Sea Rock Property as under:-
Shareholders holding 5,26,854 shares in ELEL would have had an option to sell these shares to the Company upon the achievement and fulfilment of certain conditions. The intent states that the option would have been exercisable by the shareholders at a predetermined price, based on the obligations actually fulfilled by the holders of these shares. The holders of these shares are entitled to exercise this Put option on January 1, 2014 (not exercised) or July 1, 2014. In parallel, the Company also has an option to purchase these shares at the same price on April 1, 2014 (not exercised) or September 1, 2014.
Given the non-fulfilment of conditions as at date as well as the uncertainty in achieving these conditions going forward, the resolution of this Put/ Call option with respect to timing, price and resultant liability remains indeterminate.
(c) The Company has given letters of support in case of select subsidiaries and associate companies during the year.
Note 33: Operating Lease
The Company has taken certain vehicles, flats and immovable properties on operating lease. The total lease rent paid on the same is included under Rent and Licence Fees forming part of Other Expenses (Refer note no 28 (ii)). The minimum future lease rentals payable in respect of non-cancellable leases entered into after April 1,2001 to the extent of minimum guarantee amount are as follows:-
March 31, 2014 March 31, 2013Particulars ` crores ` croresNot later than one year 15.97 16.14Later than one year but not later than five years 50.98 54.13Later than five years 308.84 314.59
Note 34 : Derivative Instruments and Unhedged Foreign Currency Exposure
The Company uses forward exchange contracts, interest rate swaps, currency swaps and options to hedge its exposure in foreign currency and interest rates. The information on derivative instruments is as follows:-
(a) Derivative Instruments outstanding :
Nature of DerivativeMarch 31, 2014 March 31, 2013
US $ million ` crores US $ million ` croresInterest Rate Swaps 63.34 - 63.34 -
The above excludes cross currency interest rate swaps referred to in footnote to Note 4.
* Net of notional amount of US$ 186.38 million (Previous year – US$ 186.38 million) as cross currency interest rate swaps referred to in footnote to Note No. 4.
130
Notes to Financial Statements for the year ended March 31, 2014Note 35 : Foreign Currency Monetary Item Translation Difference Account
The Company has exercised the option granted vide notification No. G.S.R.225(E) dated March 31, 2009, issued by the Ministry of Corporate Affairs and subsequent Notification No G.S.R.378(E) (F.No17/133/2008-CL.V) dated May 11, 2011 and Amendment Notification No G.S.R.914(E) dated December 29, 2011 incorporating the new paragraph 46(A) relating to Accounting Standard (AS) 11 “The Effects of Changes in Foreign Exchange Rates” and accordingly, the exchange differences arising on revaluation of long term foreign currency monetary items for the year ended March 31, 2014 have been accumulated in “Foreign Currency Monetary Item Translation Difference” and amortised over the balance period of such long term asset or liability, by recognition as income or expense in each of such periods. Foreign currency monetary items outstanding as at March 31, 2014 are accounted as per Company’s Policy on Transactions in Foreign Exchange (Refer Note 2(f)).
Note 36 : Employee Benefits
(a) The Company has recognised the following expenses as defined contribution plan under the head “Company’s Contribution to Provident Fund and Other Funds”(net of recoveries) :
March 31, 2014 March 31, 2013
` crores ` crores
Provident Fund 16.27 16.08
Superannuation Fund 4.00 4.44
Total 20.27 20.52
(b) The Company operates post retirement defined benefit plans as follows : -
i. Funded :
• Post Retirement Gratuity. • Pension to Employees – Post retirementminimum guaranteed pension scheme for certain categories of
employees, which is funded by the Company and the employees.
ii. Unfunded :
• Pension to Executive Directors and Employees – Post retirement minimum guaranteed pension scheme for certain retired executive directors and certain categories of employees, which is unfunded.
The Company has formulated a funded pension scheme for certain employees. The actuarial liability arising on the above, after allowing for employees’ contribution is determined as at the year end, on the basis of uniform accrual benefit, with demographic assumptions taken as Nil.
131
Notes to Financial Statements for the year ended March 31, 2014(d) Defined Benefit Plans – As per Actuarial Valuation on March 31, 2014 : -
i. Amount to be recognised in Balance Sheet and movement in net liability
Table 2 – UK Published PA (90) annuity rated down by 4 years
vii. Effect of Change in Assumed Health Care Cost
1% Increase 1% Decrease` crores ` crores
Effect on the aggregate of service cost and interest cost
(1% Increase - `40,774 (Previous year - ` 48,651))
(1% Decrease - ` (45,556) (Previous year - `42,691))
- -
- -
Effect of defined benefit obligation 0.05 (0.05)0.06 (0.05)
134
Notes to Financial Statements for the year ended March 31, 2014 viii. Experience Adjustments
2013-14 2012-13 2011-12 2010-11 2009-10
` crores ` crores ` crores ` crores ` crores
Defined Benefit Obligation 161.78 172.08 158.89 124.50 106.89
Plan Assets 147.76 149.68 135.04 117.63 98.94
Deficit (14.02) (22.38) (23.85) (6.87) (7.95)
Experience Adjustment on Plan Liabilities 0.28 14.96 20.08 3.88 1.97
Experience Adjustment on Plan Assets 0.33 6.24 (0.25) (0.19) 7.61
Footnote : Figures in italics under (i) to (vii) are of the previous year.
The estimate of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotions and other relevant factors. The above information has been certified by the actuary and has been relied upon by the Auditors.
Note 37 : CIF Value of imports
Particulars March 31, 2014 March 31, 2013
` crores ` crores
Raw Materials (Food and Beverages) 10.24 8.84
Stores, Supplies and Spare Parts for Machinery 6.59 5.32
Capital Goods 28.59 18.02
Note 38 : Earnings in Foreign Exchange
Particulars March 31, 2014 March 31, 2013
` crores ` crores
Rooms, Restaurants, Banquets and Other Services 719.76 727.20
Interest received 0.81 0.73
The earnings in foreign exchange, as reported above, are on the basis of actual receipts during the year..
Note 39 : Expenditure in Foreign Exchange
Particulars March 31, 2014 March 31, 2013
` crores ` crores
Membership Fees 2.37 7.33
Advertising 55.99 43.08
Professional and Consultancy Fees 10.70 9.68
Interest 26.53 25.41
Others 27.27 32.98
135
Notes to Financial Statements for the year ended March 31, 2014Note 40 : Remittance in Foreign Currencies for dividend to non-resident shareholders
The Company has not remitted any amount in foreign currencies on account of dividend during the year and does not have information as to the extent to which remittances, if any, in foreign currencies on account of dividend have been made by/on behalf of non-resident shareholders. The particulars of dividend paid to non-resident shareholders during the year, are as under:
Particulars March 31, 2014 March 31, 2013
Year to which dividend relates 2012-13 2011-12
Numbers of non-resident shareholders 2,842 2,984
Number of Ordinary Shares held by non-resident shareholders 5,951,840 5,787,643
Gross amount of dividend (` crores) 0.47 0.57
Net amount of dividend (` crores) 0.47 0.57
Note 41 :
The Company, on a review of its foreign operations had, in the past, made voluntary disclosures to the appropriate regulator, of what it considered to be possible irregularities, in relation to foreign exchange transactions relating to the period prior to 1998. Arising out of such disclosures, the Company received show cause notices. The Company has replied to the notices and is waiting for the directorate to return its files, after which it will complete the replies. Adjudication proceedings are in progress.
Note 42 :
Deposits and Advances in the nature of loans to Subsidiaries, Jointly Controlled Entities and Associates : -
ParticularsMaximum amount outstanding during
the year
Balance Outstanding as on
March 31, 2014
Maximum amount outstanding during the previous year
Balance Outstanding as on
March 31, 2013
` crores ` crores ` crores ` crores
Subsidiaries
International Hotel Management Services Inc.
69.00 - 119.86 -
Taj International Hotels (HK) Ltd.* 1,337.75 1,221.71 1,148.67 1,105.56
Jointly Controlled Entities
Taj Karnataka Hotels & Resorts Ltd. 5.35 5.35 5.35 5.35
TAL Hotels & Resorts Ltd. (repayment beyond 7 years)
Taida Trading and Industries Ltd. 8.04 8.04 8.04 8.04
* There is no repayment schedule and no interest is payable
136
Notes to Financial Statements for the year ended March 31, 2014Note 43 : Related Party Disclosures
(a) The names of related parties of the Company are as under :
i. Company having substantial interest
Name of the Company Country of Incorporation
Tata Sons Ltd. India
ii. Subsidiary Companies
Name of the Company Country of Incorporation
Domestic
TIFCO Holdings Ltd. India
Residency Foods & Beverages Ltd. India
KTC Hotels Ltd. India
United Hotels Ltd. India
Taj SATS Air Catering Ltd. India
Roots Corporation Ltd. India
Taj Enterprises Ltd. India
Taj Trade and Transport Co. Ltd. India
Benares Hotels Ltd. India
Inditravel Ltd. India
Piem Hotels Ltd. India
Northern India Hotels Ltd. India
TIFCO Security Services Ltd. India
Taj Rhein Shoes Co. Ltd. India
Ideal Ice & Cold Storage Co. Ltd. India
International
Samsara Properties Ltd. British Virgin Islands
Apex Hotel Management Services (Pte) Ltd. Singapore
Chieftain Corporation NV Netherlands Antilles
IHOCO BV Netherlands
St. James Court Hotel Ltd. United Kingdom
Taj International Hotels Ltd. United Kingdom
IHMS (Australia) Pty. Ltd. Australia
International Hotel Management Services Inc. United States of America
Taj International Hotels (H.K.) Ltd. Hong Kong
PIEM International (H.K.) Ltd. Hong Kong
137
Notes to Financial Statements for the year ended March 31, 2014 iii. Jointly Controlled Entities
Name of the Company Country of Incorporation
Domestic
Taj Madras Flight Kitchen Pvt. Ltd. India
Taj Karnataka Hotels & Resorts Ltd. India
Taj Kerala Hotels & Resorts Ltd. India
Taj GVK Hotels & Resorts Ltd. India
Taj Safaris Ltd. India
Kaveri Retreats and Resorts Ltd. India
International
TAL Hotels & Resorts Ltd. Hong Kong
IHMS Hotels (SA) (Proprietary) Ltd. South Africa
iv. Associates
Name of the Company Country of Incorporation
Domestic
Oriental Hotels Ltd. India
Taj Madurai Ltd. India
Taida Trading & Industries Ltd. India
International
Lanka Island Resort Ltd. Sri Lanka
TAL Lanka Hotels PLC Sri Lanka
BJETS Pte Ltd., Singapore Singapore
v. Key Management Personnel
Particulars Relation
Raymond N. Bickson Managing Director
Anil P. Goel Executive Director – Finance
Abhijit Mukerji Executive Director - Hotel Operations
Mehernosh S. Kapadia Executive Director - Corporate Affairs
138
Notes to Financial Statements for the year ended March 31, 2014(b) Details of related party transactions during the year ended March 31, 2014 and outstanding balances as at March 31,
Guarantees/Letter of Comfort given on behalf(net) (Refer Note 30 (d))
- - 90.52 - -
- - 43.44 - 115.40
139
Notes to Financial Statements for the year ended March 31, 2014
ParticularsCompany having
substantial interest
Key Management
PersonnelSubsidiaries Associates
Jointly Controlled
Entities
` crores ` crores ` crores ` crores ` crores
Balances outstanding at the end of the year
Trade Receivables 0.05 - 1.76 8.66 15.62
0.96 - 11.25 11.47 12.86
Trade Payables 0.03 - 5.31 0.21 0.07
2.85 - 1.15 0.07 0.03
Due from/(to) on Current A/c - - 1.40 (1.00) (2.88)
- - (6.53) (0.80) (2.25)
Interest Receivable - - - 0.61 1.43
- - 4.10 1.21 2.88
Other Recoverable 0.30 - 1.84 1.78 4.43
- - 1.45 1.74 2.06
Interest accrued but not due - - - - -
- - 0.31 - -
ICD Payable - - - - -
- - 45.00 - -
ICD Receivable - - - - -
- - - - 4.90
Deposits Receivable - - 1225.68 8.04 14.35
- - 1109.54 8.04 23.40
Deposits Payable - - 3.97 - -
- - 3.37 - -
Guarantees/Letter of Comfort given on behalf - - 836.48 - 115.52
(Refer Note 30(d)) - - 733.08 - 115.40
Footnotes :
(i) Figures in italics are of the previous year.
(ii) Represent investing activities which have not involved cash flows.
(iii) Managerial remuneration excludes provision for gratuity and compensated absences, since these are provided on the basis of an actuarial valuation for the Company as a whole.
140
Notes to Financial Statements for the year ended March 31, 2014(c) Statement of Material Transactions
Name of the Company March 31, 2014 March 31, 2013
` crores ` crores
Company having substantial interest
Tata Sons Ltd.
Allotment of Shares - 497.47
Dividend Received 3.60 3.60
Dividend Paid 16.16 19.67
Sale of goods and services - 3.13
Trade Payables - 2.85
Remuneration to Key Management Personnel
Raymond N. Bickson 10.40 10.33
Anil P. Goel 2.37 2.17
Abhijit Mukerji 2.08 1.99
Mehernosh S. Kapadia 1.65 1.15
Subsidiaries
TIFCO Holdings Ltd.
Interest Paid/ Provided 0.33 0.76
Purchase of goods and services - 0.40
Dividend Received 6.52 -
ICD raised during the year 32.75 68.25
ICD repaid during the year 32.75 88.25
KTC Hotels Ltd.
Operating / Licence Fees Paid 0.26 0.45
Dividend Received - 2.42
Due on current account (Net) - Receivable / (Payable) (1.84) (1.65)
Taj SATS Air Catering Ltd.
ICD Placed during the year - 2.50
ICD Encashed during the year - 2.50
Purchase of goods and services - 1.34
Other Recoverable - 0.49
141
Notes to Financial Statements for the year ended March 31, 2014
Name of the Company March 31, 2014 March 31, 2013
` crores ` crores
Taj Trade & Transport Co. Ltd.
Dividend paid - 0.09
Sale of goods and services 3.02 2.54
Piem Hotels Ltd.
Interest Paid/ Provided 2.14 1.79
Dividend Received 4.44 4.44
Operating/Licence Fees Received 27.14 26.96
Sale of goods and services 1.39 1.27
Due on current account (Net) - Receivable /(Payable) (1.15) (10.45)
Other Recoverable 1.16 0.79
Trade Receivables - 6.47
ICD raised during the year 30.00 204.00
ICD repaid during the year 75.00 159.00
ICD closing position – Payable - 45.00
Interest accrued but not due - 0.31
Deposit given outstanding - 0.48
Transfer of Project (8.90) -
Inditravel Ltd.
Dividend paid - 0.03
Purchase of goods and services 10.48 8.79
Sale of goods and services 3.88 1.70
Trade Payables 2.30 0.85
ICD raised during the year 19.00 29.50
ICD repaid during the year 19.00 34.50
International Hotel Management Services Inc.
Due on current account (Net) – Receivable/(Payable) 5.93 5.74
Purchase of shares 64.89 119.47
Shareholder’s deposit placed 67.41 120.89
Deposit Encashed 64.89 119.47
Trade Payable 0.77 -
Interest Receivable - 4.10
Purchase of goods and services 9.85 8.25
142
Notes to Financial Statements for the year ended March 31, 2014
Name of the Company March 31, 2014 March 31, 2013
` crores ` crores
St. James Court Hotel Ltd.
Due on current account (Net) – Receivable/(Payable) 2.81 -
Taj International Hotels (H.K.) Ltd.
Purchase of shares - 665.03
Deposit Closing Position – Receivable 1221.71 1105.56
Deposit Payable 3.72 3.37
Jointly Controlled Entities
Taj GVK Hotels & Resorts Ltd.
Interest received/ accrued - 0.35
Dividend Received - 2.40
Due on current account (Net) – Receivable/(Payable) - (1.98)
Other Recoverable 1.92 0.56
Operating/Licence Fees Received 14.19 15.26
Trade Receivables 7.41 5.95
ICD Encashed 5.00 -
Deposit given outstanding - 5.00
Taj Safaris Ltd.
Other Recoverable 2.23 -
Taj Karnataka Hotels & Resorts Ltd.
Due on current account (Net) – Receivable - 1.44
Deposit given outstanding 5.35 5.35
Interest Receivable 0.62 1.52
TAL Hotels & Resorts Ltd.
Interest received / accrued 0.81 0.73
Deposit Closing Position – Receivable 9.00 8.15
Interest Receivable 0.81 -
143
Notes to Financial Statements for the year ended March 31, 2014
Name of the Company March 31, 2014 March 31, 2013
` crores ` crores
IHMS Hotels (SA) (Proprietary) Ltd.
Share application Money Paid to 14.61 0.47
Trade Receivable 3.34 -
Due on current account (Net) – Receivable 0.89 0.96
Kaveri Retreat & Resorts Ltd.
Interest received / accrued 0.43 -
Due on current account (Net) – Payable 1.32 -
ICD Encashed 4.90 -
ICD Placed during the year - 4.90
ICD Closing position – Receivable - 4.90
Associates
Taida Trading & Industries Ltd.
Interest received/ accrued 0.79 0.72
Interest Receivable 0.61 1.21
Dividend paid - 0.02
Due on current account (Net) – Receivable - 1.03
ICD Closing Position - Receivable 8.04 8.04
Oriental Hotels Ltd.
Dividend Received - 1.52
Operating/Licence Fees Received 23.69 23.43
Other Recoverable 1.78 -
Trade Receivables 7.79 9.07
Due on current account (Net) – Payable 1.42 2.20
Footnote : Transaction with related party excludes, recovery of spends on their behalf.
Note 44 :
The Company’s only business being hoteliering, disclosure of segment-wise information is not applicable under Accounting Standard 17 - ‘Segmental Information’ (AS-17) notified by the Companies (Accounting Standards) Rules, 2006 (as amended). There is no geographical segment to be reported since all the operations are undertaken in India.
144
Notes to Financial Statements for the year ended March 31, 2014Note 45 : In compliance with Accounting Standard 27 – ‘Financial Reporting of Interests in Joint Ventures’ - (AS-27), notified by the Companies (Accounting Standards) Rules, 2006 (as amended), the Company has interests directly or through its Subsidiaries in the following jointly controlled entities:
Name of the CompanyCountry of
Incorporation
Amount of Interest based on the Audited Accounts for the year ended March 31, 2014
Holding Assets Liabilities Income ExpenditureContingent Liabilities
Taj Safaris Ltd. India35.10 8.73 8.42 6.51 7.32 0.41 0.01
35.10 9.20 8.08 6.15 7.52 0.28 0.01
Taj GVK Hotels and Resorts Ltd.
India25.52 170.18 81.25 62.56 63.38 11.12 0.38
25.52 171.44 83.40 64.88 62.64 2.87 0.15
Taj Karnataka Hotels and Resorts Ltd.
India44.27 3.89 6.80 2.88 2.75 - -
44.27 4.07 7.11 2.43 2.52 - 0.02
Taj Kerala Hotels Ltd. India28.30 18.75 4.07 12.15 12.12 1.27 0.24
28.30 19.18 4.19 11.17 10.99 0.86 0.16
Kaveri Retreat & Resorts Limited
India50.00 49.91 34.10 12.48 15.86 - -
50.00 48.96 29.77 3.72 9.83 1.04 0.32
Taj Madras Flight Kitchen Pvt. Ltd.
India50.00 22.86 2.16 15.24 14.45 12.71 0.36
50.00 22.12 2.22 13.21 12.11 11.86 0.30
TAL Hotels & Resorts Ltd. Hong Kong27.49 160.16 66.02 73.01 93.60 0.13 0.01
27.49 161.17 51.10 68.89 58.09 0.02 0.86
IHMS Hotels (SA) (Proprietary) Ltd.
South Africa50.00 132.93 148.49 34.82 60.10 - -
50.00 144.24 139.94 4.43 31.35 - -
Footnote: Figures in the italics relate to the previous year.
145
Notes to Financial Statements for the year ended March 31, 2014Note 46 : Earnings Per Share (EPS) :
Earnings Per Share is calculated in accordance with Accounting Standard 20 – ‘Earnings Per Share’ - (AS-20), notified by the Company’s (Accounting Standards) Rules, 2006 (as amended).
Particulars March 31, 2014 March 31, 2013
Loss after tax –(` crores) (590.49) (276.61)
Number of Ordinary Shares 80,74,72,787 80,74,72,787
Weighted Average Number of Ordinary Shares 80,74,72,787 79,66,89,225
Face Value per Ordinary Share (`) 1 1
Earnings Per Share –(`) Basic and Diluted (7.31) (3.47)
Note 47 :
The Company has regrouped / reclassified the previous year figures to conform to the current year’s presentation.
For and on behalf of the Board
Cyrus P. Mistry Chairman
Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - Finance
Abhijit Mukerji Executive Director - Hotel Operations
Mehernosh S. Kapadia Executive Director - Corporate Affairs
Deepak Parekh Director
Jagdish Capoor Director
Nadir Godrej Director
Guy Lindsay Macintyre Crawford Director
Ireena Vittal Director
Beejal Desai Vice President - Legal & Company Secretary
Mumbai, May 30, 2014
146
INDEPENDENT AUDITORS’ REPORT
TO THE BOARD OF DIRECTORS OF
THE INDIAN HOTELS COMPANY LIMITED
Report on the Consolidated Financial Statements
1. We have audited the accompanying consolidated financial statements of THE INDIAN HOTELS COMPANY LIMITED ( the “Company”), its subsidiaries and jointly controlled entities (the Company, its subsidiaries and jointly controlled entities constitute the“Group”), which comprise the Consolidated Balance Sheet as at 31st March, 2014, the Consolidated Statement of Profit and Loss and the Consolidated Cash Flow Statement for the year then ended, and a summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
2. The Company’s Management is responsible for the preparation of these consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accordance with the accounting principles generally accepted in India. This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
3. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and presentation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
4. In our opinion and to the best of our information and according to the explanations given to us, based on the consideration of the reports of the other auditors on the financial statements of the subsidiaries, jointly controlled entities and associates referred to in paragraph 5 below in the Other Matter paragraph, the aforesaid consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:
(a) in the case of the Consolidated Balance Sheet, of the state of affairs of the Group as at 31st March, 2014;
(b) in the case of the Consolidated Statement of Profit and Loss, of the loss of the Group for the year ended on that date; and
(c) in the case of the Consolidated Cash Flow Statement, of the cash flows of the Group for the year ended on that date.
147
Other Matter
5. We did not audit the financial statements of twenty six subsidiaries (including step down subsidiaries) and five jointly controlled entities, whose financial statements reflect total assets (net) of ` 5,275.90 crores as at 31st March, 2014, total revenues of ` 1,827.09 crores and net cash inflows amounting to ` 23.64 crores for the year ended on that date, as considered in the consolidated financial statements. The consolidated financial statements also include the Group share of net loss of ` 13.25 crores for the year ended 31st March, 2014, as considered in the consolidated financial statements, in respect of six associates, whose financial statements have not been audited by us. These financial statements have been audited by other auditors whose reports have been furnished to us by the Management and our opinion, in so far as it relates to the amounts and disclosures included in respect of these subsidiaries, jointly controlled entities and associates, is based solely on the reports of the other auditors.
Our opinion is not qualified in respect of this matter.
8,581.19 8,347.24 Current assetsCurrent investments 18 107.93 40.69 Inventories 19 102.07 96.74 Trade receivables 20 280.49 273.98 Cash and bank balances 21 183.55 210.06 Short-term loans and advances 22 190.42 245.45 Other current assets 23 72.92 81.57
937.38 948.49 Total 9,518.57 9,295.73 Summary of significant accounting policies 2 The accompanying notes form an integral part of the consolidated financial statements 1 - 44
In terms of our report attached.For Deloitte Haskins & Sells LLP For and on behalf of the Board
Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - Finance
Abhijit Mukerji Executive Director - Hotel Operations
Beejal Desai President - Legal & Company Secretary
Chartered Accountants
Sanjiv V. PilgaonkarPartner
Mumbai, May 30, 2014
149
In terms of our report attached.For Deloitte Haskins & Sells LLP For and on behalf of the Board
Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - Finance
Abhijit Mukerji Executive Director - Hotel Operations
Beejal Desai President - Legal & Company Secretary
Chartered Accountants
Sanjiv V. PilgaonkarPartner
Mumbai, May 30, 2014
Consolidated Statement of Profit and Loss for the year ended March 31, 2014
Note March 31, 2014` crores
March 31, 2013` crores
Income
Rooms, Restaurants, Banquets and Other Operating Income 24 4,066.19 3,743.36
Other Income 25 59.75 60.16
Total Income 4,125.94 3,803.52
Expenditure
Food and beverages consumed 427.07 381.55
Employee benefit expenses and Payment to Contractors 26 1,372.19 1,271.75
Finance costs 27 168.51 170.74
Depreciation and amortisation expenses 13 308.13 288.42
Other operating and general expenses 28 1,707.36 1,552.42
Total Expenses 3,983.26 3,664.88
Profit Before Tax and Exceptional Items 142.68 138.64
Exceptional Items Gain / (Loss) 29 (554.84) (430.43)
Loss Before Tax (412.16) (291.79)
Tax Expense
Current Tax 94.35 91.47
Deferred Tax 42.03 22.55
Minimum Alternate Tax Credit (0.59) (1.37)
Short / (Excess) Provision of Tax / Deferred Tax of earlier years (Net) (24.84) (13.69)
Total Tax Expenses 110.95 98.96
Loss After Tax before Minority Interest & Share of Associates (523.11) (390.75)
Profit attributable to Minority Interest (17.49) (40.86)
Share of Profit / (Loss) of Associates (13.25) 1.37
Loss After Tax, Minority Interest & Share of Associates (553.85) (430.24)
Earnings Per Share - 42
Basic and Diluted - ( ` ) (6.86) (5.40)
Face Value per Ordinary share - ( ` ) 1.00 1.00
Summary of significant accounting policies 2
The accompanying notes form an integral part of the consolidated financial statements 1 - 44
150
Consolidated Cash Flow Statement for the year ended March 31, 2014
Note March 31, 2014` crores
March 31, 2013` crores
Cash Flow From Operating Activities Loss Before Tax (412.16) (291.79) Adjustments For : Depreciation and Amortisation 308.13 288.42 (Profit) / Loss on sale of investments (0.04) (14.70) (Profit) / Loss on sale of assets 2.37 4.22 Expenditure on discontinued project written off 29.78 - Provision for Doubtful Debts and advances 64.94 7.80 Dividend Income (13.01) (14.60) Interest Income (23.26) (19.04) Finance Cost 168.51 170.74 Unrealised Exchange Loss / (Gain) 39.04 8.95 Miscellaneous Expenditure written off 0.07 2.39 Reversal of Liabilities 0.52 (8.55) Provision for Loyalty Programmes (net of Redemptions) 1.25 (0.36) Provision for Stock 0.18 0.13 Provision for Diminution in value of investment 304.61 373.50 Provision for obligation of an Associate - 27.55 Provision for contingencies 81.98 (0.26) Provision for Employee Benefits (2.60) 8.91
962.47 835.10 Cash Operating Profit before working capital changes 550.31 543.31 Adjustments For : Trade and Other Receivables 49.51 (9.18) Inventories (3.97) (9.79) Trade and Other Payables 21.28 69.73
66.82 50.76 Cash Generated from Operating Activities 617.13 594.07 Direct Taxes Paid (78.21) (92.30)Net Cash From Operating Activities (A) 538.92 501.77 Cash Flow From Investing Activities Purchase of Fixed Assets (including CWIP) (342.17) (425.09) Sale of Fixed Assets 2.21 2.35 Purchase of Investments (including advance paid) (1.54) (5.98) Purchase of current investments (84.11) - Sale of Investment - 21.14 Proceeds from sale / redemption of current investments 19.14 22.06 Interest Received 30.31 21.20 Dividend Received 13.01 17.71 Bank Balances not considered as Cash & Cash Equivalents 54.22 14.31 Long Term Deposits refunded by Other Companies (1.29) 0.81 Short term Loans repaid by other company 0.83 - Deposits Refunded by / (Placed with ) Other Companies 8.35 (15.76)Net Cash Used In Investing Activities (B) (301.04) (347.25)
151
Consolidated Cash Flow Statement for the year ended March 31, 2014
Repayment of long term Loans and Debentures (146.12) (624.27)
Proceeds from long term Loans and Debentures 292.00 366.87
Short Term Loans Raised / (Repaid) (Net) (78.88) 16.98
Long Term Trade Deposits Raised / ( Repaid) 0.48 (0.25)
Proceeds from issue of Equity shares to minority interest by a subsidiary - 50.00
Dividend Paid (Including tax on dividend) (92.91) (109.56)
Net Cash Used In Financing Activities (C) (211.86) (117.32)
Net Increase / (Decrease) In Cash and Cash Equivalents (A + B + C) 26.02 37.20
Cash and Cash Equivalents - Opening - 1st April 123.60 84.57
Impact of Change in Stake in JV - 0.44
Adjustment for translation of foreign currency balances 3.62 1.39
Cash and Cash Equivalents - Closing - 31st March 153.24 123.60
Footnotes :
1. Reconciliation of Cash and cash equivalents with Cash and bank balances as per the Balance Sheet
Cash and cash equivalents as above 153.24 123.60
Add : Other Cash and Bank Balances
Call and Short-term Deposits 33.79 88.75
Deposits pledged with others 0.80 1.34
Margin money deposits 8.51 5.48
Earmarked balances 12.24 11.79
Cash and bank balances as per the Balance Sheet 208.58 230.96
Less : Classified as Non-Current (Refer Note 17) 25.03 20.90
Cash and bank balances in Note 21 183.55 210.06
2. The Group through its Jointly Controlled Entity have accquired “Good Hope Palace Hotels (Pty) Ltd.” for which no cash flow were involved in previous year.
Summary of significant accounting policies 2
The accompanying notes form an integral part of the financial statements 1 - 44 In terms of our report attached.For Deloitte Haskins & Sells LLP For and on behalf of the Board
Raymond N. Bickson Managing Director
Anil P. Goel Executive Director - Finance
Abhijit Mukerji Executive Director - Hotel Operations
Beejal Desai President - Legal & Company Secretary
Chartered Accountants
Sanjiv V. PilgaonkarPartner
Mumbai, May 30, 2014
152
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 1. Basis of consolidation
(a) The consolidated financial statements relate to The Indian Hotels Company Ltd. (the “Company”), its subsidiaries, jointly controlled entities and associates. The Company, its subsidiaries and jointly controlled entities together constitute the “Group”. The consolidated financial statements have been prepared on the following basis:
(i) The financial statements of the Company and its subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating intra-group balances, intra-group transactions and unrealised profits or losses as per Accounting Standard 21 ‘Consolidated Financial Statements’, as notified by the Companies (Accounting Standards) Rules, 2006 (as amended).
(ii) In the case of foreign subsidiaries and foreign jointly controlled entities, revenue items are consolidated at the average exchange rate prevailing during the year. The opening balance in the Statement of Profit and Loss and the opening balance in Reserves and Surplus have been converted at the rates prevailing as at the respective Balance Sheet dates. All assets and liabilities as at the year-end are converted at the rates prevailing as on that date. Any exchange difference arising on consolidation is shown under Foreign Currency Translation Reserve.
(iii) Investments in Associate Companies have been accounted for under the equity method as per Accounting Standard 23 ‘Accounting for Investments in Associates in Consolidated Financial Statements’, as notified by the Companies (Accounting Standards) Rules, 2006 (as amended). The share of profits/loss of each of the associate companies (the loss being restricted to the cost of investment) has been added/deducted from the cost of investments.
(iv) Interests in Jointly Controlled Entities have been accounted for by using the proportionate consolidation method as per Accounting Standard 27 ‘Financial Reporting of Interests in Joint Ventures’, as notified by the Companies (Accounting Standards) Rules, 2006 (as amended). Share of profit / loss, assets and liabilities in the jointly controlled entities, which are not subsidiaries, have been consolidated on a line-by-line basis by adding together the book values of like items of assets, liabilities, incomes and expenses on a proportionate basis to the extent of the Group's equity interest in such entity as per AS 27. The intra-group balances, intra-group transactions and unrealised profits or losses have been eliminated to the extent of the Group's share in the entity.
(v) The financial statements of subsidiaries, jointly controlled entities and associates consolidated are drawn upto the same reporting date as that of the Company except in the case of an Associate Company where the financial statements have been drawn upto December 31, 2013.
(vi) The excess of cost to the Group of its investment in the subsidiaries and jointly controlled entities over the Group’s portion of equity as at the date of making the investment is recognised in the financial statements as “Goodwill on Consolidation”.
(vii) The excess of the Group’s share in equity of each subsidiary, jointly controlled entity and associates over the cost of its acquisition at the date on which the investment is made, is recognised as “Capital Reserve on Consolidation” and included as Reserves and Surplus under Shareholders’ Equity in the Consolidated Balance Sheet.
(viii) Goodwill
• GoodwillcomprisestheportionofthepurchasepriceforanacquisitionthatexceedstheGroup’sshareinthe identifiable assets, with deductions for liabilities, calculated on the date of acquisition.
• Goodwill arising from theacquisitionof associates is included in the carrying valueof the investment inassociates.
• Goodwillisdeemedtohaveanindefiniteusefullifeandisreportedatacquisitionvaluewithdeductionforaccumulated impairments. An impairment test of goodwill is conducted once every year or more often if there is an indication of a decrease in value. The impairment loss on goodwill is reported in the Statement of Profit and Loss.
a. The amount of equity attributable to the minorities at the date on which investment in a subsidiary is made; and
b. The minorities’ share of movements in equity since the date the parent-subsidiary relationship came into existence.
Minority interests’ share of net profit/loss for the year of consolidated subsidiaries is identified and adjusted against the profit/loss after tax of the Group. The losses attributable to the minority are restricted to the extent of Minority’s equity.
153
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(b) The list of subsidiaries, jointly controlled entities and associates, which are included in the consolidation with their respective country of incorporation and the Group’s holding therein, is given below: -
(i) Subsidiary Companies
As at March 31, 2014 As at March 31, 2013
Country of Incorporation
Held directly by Parent or through its subsidiaries
(%)
Effective Holding
(%)
Held directly by Parent or through its subsidiaries
Lanka Island Resorts Limited Sri Lanka 24.66 24.66 24.66 24.66
TAL Lanka Hotels PLC Sri Lanka 24.62 24.62 24.62 24.62
Footnotes :
(i) Including 5.40% (Previous year 5.40%) of the shares held in the form of Global Depository Receipts (GDR).
(ii) The carrying amount of the investment has been reported as Nil, as the Group’s share of losses exceeds the cost/carrying value.
(iii) Audited financial statement as at December 31, 2013 have been used in the preparation of the consolidated financial statement of the Group.
155
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(c) The following amounts are included in the financial statements in respect of the Jointly Controlled Entities based on the proportionate consolidation method prescribed in the Accounting Standard relating to ‘Financial Reporting of Interests in Joint Ventures’ (AS 27) as notified by the Companies (Accounting Standards) Rules, 2006 (as amended). (Post Elimination):-
March 31, 2014` cores
March 31, 2013` crores
Assets
Fixed Assets (including CWIP) 397.94 391.75
Non-current investments 13.19 14.14
Deferred Tax Assets (Net) 1.80 2.49
Other non-current assets 50.30 69.14
Current assets 72.54 68.96
Liabilities
Non-current liabilities 215.19 186.63
Deferred Tax Liability (Net) 13.92 12.44
Current liabilities 72.64 77.76
Contingent Liabilities 24.86 13.70
Capital Commitments 0.99 1.82
Income
Income from operations 217.31 188.34
Other income 3.32 2.21
Expenses
Food & Beverages consumed 24.60 20.85
Employee benefit expenses 56.18 47.04
Depreciation 26.43 21.42
Finance Cost 18.46 15.41
Other operating & general expense 101.45 84.11
Tax Expenses
Tax expenses 3.45 1.09
Note 2. Significant Accounting Policies
These financial statements have been prepared in accordance with the generally accepted accounting principles in India (“Indian GAAP”) under the historical cost convention on an accrual basis. These financial statements have been prepared to comply in all material aspects with the accounting standards notified under Section 211(3C) [Companies (Accounting Standards) Rules, 2006, as amended] (which continue to be applicable in respect of section 133 of the Companies Act, 2013 in terms of General Circular 15/2013 dated September 13, 2013 of the Ministry of Corporate Affairs) and the other relevant provisions of the Companies Act, 1956. Current assets do not include elements which are not expected to be realised within 1 year and current liabilities do not include items which are due after 1 year, the period of 1 year being reckoned from the reporting date. The accounting policies adopted in the preparation of these financial statements are consistent with those of the previous years.
The preparation of the financial statements requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses. The Management believes that the estimates used in the preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. The significant accounting policies adopted in the presentation of the financial statements are as under:-
156
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(a) Revenue recognition :
Revenue comprises sale of rooms, food and beverages and allied services relating to hotel operations, including management and operating fees. Revenue is recognised upon rendering of the service, provided pervasive evidence of an arrangement exist, tariff / rates is fixed or are determinable and collectability is reasonably certain. Rebates and discounts granted to customers are reduced from revenue.
Revenue from in-flight catering and institutional catering of food and beverages and other allied services rendered to airlines and other institutions are recognised, net of trade discounts, deductions and cost reimbursements, on transfer of significant risks and rewards of ownership to the buyer, which generally coincides with the delivery of food and beverages to airlines and other customers Sales include excise duty but exclude sales tax and value added tax.
Revenue from sales of goods is net of sales tax, returns and trade discounts. Service income is net of service tax.
Interest
Interest income is accrued on a time proportion basis having regard to the amount outstanding and the rate applicable.
Dividend
Dividend income is recognised when the Group’s right to receive the payment is established.
(b) Employee Benefits (other than persons engaged through contractors):
(i) Defined Contribution Schemes
i. Provident Fund
The eligible employees of domestic components of the Group are entitled to receive benefits under the provident fund, a defined contribution plan, in which both employees and the Company make monthly contributions at a specified percentage of the covered employees’ salary (currently 12% of employees’ salary), which is recognised as an expense in the Statement of Profit and Loss during the period. The contributions as specified under the law are paid to the provident fund set up as irrevocable trust by the Group. The Group is generally liable for annual contributions and any shortfall in the fund assets based on the government specified minimum rates of return and recognises such contributions and shortfall, if any, as an expense in the year in which the corresponding services are rendered by the employee.
Eligible employees of some of the overseas components of the Group are members of defined contribution plans. These plans require the Group to make contributions equivalent to a pre-define proportion percentage of each eligible participant’s plan compensated for each year. The Group may also make a profit sharing contribution to uniform percentage of eligible participant’s plan compensation based on profit as defined. The Group recognised such contribution as an expense in the year in which the employee renders service.
ii. Others
Employee benefits arising out of contributions towards Provident Fund and Family Pension Scheme to Regional Provident Fund Commissioner or the Central Provident Commissioner and Social Security etc. paid/payable during the year are recognised in the Statement of Profit and Loss.
The Group also has separate funded and unfunded schemes, which guarantee a minimum pension to certain categories of employees. The Group accounts for the net present value of its obligation therein, based on an independent external actuarial valuation carried out at the Balance Sheet date.
Certain international subsidiaries operate a defined contribution pension scheme and the pension charge represents the amounts paid/payable by them to the Fund.
(ii) Gratuity Fund
The Group makes annual contributions to gratuity funds administered by the trustees for amounts notified by the funds in respect of employee of domestic components. The Group accounts for the net present value of its obligations for gratuity benefits, based on an independent actuarial valuation, determined on the basis of the projected unit credit method, carried out as at the Balance Sheet date. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
157
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(iii) Post-Retirement Benefits
The net present value of the Group’s obligation towards post retirement pension scheme for retired whole time directors and Post employment medical benefits to qualifying employees is actuarially determined, based on the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss. The Group also participates in an industry-wide defined benefit plan which provides pension linked to final salaries in respect of employees of certain overseas hotel properties. The plan is funded in a manner such that contributions are set at a level that is expected to be sufficient to pay the benefits falling due in the same period. It is not practicable to determine the present values of the Group’s obligations as the covered hotel properties have not received information from the plan’s administrator. In the absence of sufficient information the plan has been accounted as if it was a defined contribution plan.
(iv) Superannuation
The Group has a defined contribution plan for employees of its domestic components, wherein it annually contributes a sum equivalent to the eligible employee’s annual basic salary to a fund administered by the trustees. The Group recognises such contributions as an expense in the year in which the corresponding services are received from the employees.
The Group also has separate funded and unfunded schemes, which guarantee a minimum pension to certain categories of employees. The Group accounts for the net present value of its obligations therein, based on an independent external actuarial valuation, carried out as at the Balance Sheet date, which is determined on the basis of the projected unit credit method. Actuarial gains and losses are recognised immediately in the Statement of Profit and Loss.
(v) Compensated Absences
The Group has a scheme for compensated absences for employees, the liability for which is determined on the basis of an actuarial valuation, carried out at the Balance Sheet date.
(vi) Other Employee Benefits
Other benefits, comprising of discretionary Long Service Awards and Leave Travel Allowances, are determined on an undiscounted basis and recognised based on the likely entitlement thereof.
(c) Fixed Assets:
Tangible Fixed Assets:
Tangible fixed assets are stated at cost less depreciation/amortisation and impairment losses, if any. Cost includes the acquisition cost or the cost of construction, including duties and taxes (other than those refundable), expenses directly related to the location of assets and making them operational for their intended use and, in the case of qualifying assets, the attributable borrowing costs (refer note no. 2(l) below). Trade discounts, rebates and benefits arising from utilisation of duty free scrips are deducted in determining the cost of purchase. Projects under which the tangible fixed assets are not yet ready for their intended use are carried as capital work in progress at cost determined as aforesaid.
Intangible Fixed Assets:
Intangible fixed assets include cost of acquired software and designs, and cost incurred for development of the Company’s website and certain contract acquisition costs. Intangible assets are initially measured at acquisition cost including any directly attributable costs of preparing the asset for its intended use. Internally developed intangibles are capitalised if, and only if, all the following criteria can be demonstrated:
a) the technical feasibility and Company’s intention and ability of completing the project;
b) the probability that the project will generate future economic benefits;
c) the availability of adequate technical financial and other resources to complete the project; and
d) the ability to measure the development expenditure reliably.
Expenditure on projects which are not yet ready for intended use are carried as intangible assets under development.
158
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(d) Depreciation / Amortisation:
i. Depreciation:
Indian Entities
Depreciation on assets is provided at Straight Line Method (SLM) rates as specified in Schedule XIV to the Companies Act, 1956. In respect of Leasehold Land, depreciation is provided from the date the land is put to use for commercial operations, over the balance period of the lease. The renewal of these leases is considered as reasonably certain in view of past experience for the purpose of depreciation of building on leased property. In respect of improvements to buildings, depreciation is provided based on its estimated useful life.
In respect of some of the subsidiaries depreciation is provided under the written down value method at the rates and in the manner specified in Schedule XIV to the Companies Act, 1956, amounts in respect of which are not material.
International Entities
Depreciation on assets is provided at Straight Line Method (SLM) based on the estimated useful life determined by the Management of the respective Subsidiaries. In respect of improvements in the nature of structural changes and major refurbishment to buildings occupied on lease, depreciation is provided for over the period of the lease.
ii. Amortisation:
Intangible assets with finite lives are amortised over their estimated useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation periods are reviewed and impairment evaluations are carried out at least once a year. The rates currently used for amortising intangible assets are as under:
Asset Classification Rate
Leasehold Property Rights (Including lease acquisition cost) Over the term of the lease
Website Development Cost 20.00%
Cost of Customer Reservation System (including licensed software) 10.00% to 16.67%
Management Contract Acquisition Costs
Service & Operating Rights
5.00% to 33.33%
10.00%
*
Non-Compete Fees 14.29%
Brand 10.00%
* Based on the terms of the Contract.
(e) Impairment of Assets:
The carrying values of assets / cash generating units at each Balance Sheet date are reviewed for impairment of assets. If any indication of such impairment exists, the recoverable amount of such assets is estimated and impairment is recognised, if the carrying amount on these assets exceeds their recoverable amount. The recoverable amount is the greater of the net selling price and value in use. Value in use is arrived at by discounting the future cash flow to their present value based on an appropriate discount factor. When there is indication that an impairment loss recognised for an asset in prior accounting periods no longer exists or may have decreased reversal of impairment loss is recognised.
(f) Foreign Currency Translation :
Initial Recognition
On initial recognition, all foreign currency transactions are recorded by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction.
159
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Subsequent Recognition
As at the reporting date, non-monetary items which are carried at historical cost and denominated in a foreign currency are reported using the exchange rate at the date of the transaction. All non-monetary items which are carried at fair value or other similar valuation denominated in a foreign currency are reported using the exchange rates that existed when the values were determined.
All monetary assets and liabilities in foreign currency are restated at the end of accounting period. In case of the Group, With respect to long-term foreign currency monetary items that have not been hedged, from April 1, 2011 onwards, the Group has adopted the following policy:
i. Foreign exchange difference on account of a depreciable asset, is adjusted in the cost of the depreciable asset, which would be depreciated over the balance life of the asset;
ii. In other cases, the foreign exchange difference is accumulated in a Foreign Currency Monetary Item Translation Difference Account, and amortised over the balance period of such long term asset/ liability.
A monetary asset or liability is termed as a long-term foreign currency monetary item, if the asset or liability is expressed in a foreign currency and has a term of 12 months or more at the date of origination of the asset or liability.
Exchange differences on restatement of other monetary items are recognised in the Statement of Profit and Loss.
Hedge Accounting
In accordance with its risk management policy, the Group has entered into cross currency swap transactions with a view to convert its Indian Rupee borrowings into foreign currency borrowings. To the extent the Company has designated the foreign currency component of the swap contracts as hedging instruments in a net investment hedging relationship applying hedge accounting principles (prior to the revision of Accounting Standard (AS) 11 on “The Effects of Changes in Foreign Exchange Rates” by notification no. G.S.R.914(E) dated 29th December, 2011), the exchange difference arising on translation of the borrowing so converted into a foreign currency liability, at the Balance Sheet date, that are designated and are effective hedges is recognised directly in the “Hedge Reserve” account under “Reserve and Surplus” (Note 4) and the ineffective portion is recognised immediately into the Statement of Profit and Loss. Hedge Accounting is discontinued when the hedging instrument expires or is exercised or cancelled or no longer qualifies for hedge accounting.
Translation of foreign operations
Exchange differences on a monetary item that is receivable from or payable to foreign operations for which settlement is neither planned nor likely to occur in the foreseeable future which, in substance, forms a part of the Company’s net investment in that foreign operation, are accumulated in the Foreign Currency Translation Reserve until the disposal of the net investment. Upon disposal, such accumulation in the Foreign Currency Translation Reserve, or in the case of partial disposal, proportionate share of the related accumulated exchange difference, is recognised as income or as expense in the Statement of Profit and Loss. For this purpose, partial settlement of a monetary item is considered to be a partial disposal.
The financial statements of an integral foreign operations are translated using the principles and procedures as if the transactions of the foreign operations are those of the Company itself.
Exchange differences arising on repayment/revaluation of currency swap contracts, entered into in respect of some of the Group’s underlying borrowings, are recognised as income or expense, as the case may be, in the period in which they arise. Interest rate derivatives are accounted based on an underlying benchmark for the relevant period.
(g) Assets taken on lease:
Operating lease payments are recognised as expenditure in the Statement of Profit and Loss on a straight-line basis, unless another basis is more representative of the time pattern of benefits received from the use of the assets taken on lease.
Assets taken on finance lease in one of the subsidiaries and a jointly controlled entity are capitalised as tangible fixed assets. Finance leases are those where substantially all of the benefits and risks of ownership are assumed by
160
Notes to Consolidated Financial Statements for the year ended March 31, 2014
the Company. Obligations under such agreements are included in borrowings, net of the finance charge allocated to future periods. Assets acquired by finance lease are depreciated over the shorter of the lease term and their useful lives. Assets acquired by hire purchase are depreciated over their useful lives.
(h) Inventories:
Stock of food and beverages and stores and operating supplies are carried at the lower of cost (computed on a Weighted Average basis) or net realisable value. Cost include the cost of purchase including duties and taxes (other than those refundable), inward freight, and other expenditure directly attributable to the purchase. Trade discounts, rebates and benefits arising from utilisation of duty free scrip’s are deducted in determining the cost of purchase. In respect of three subsidiaries and two jointly controlled entities, stock of food & beverages and stores and operating supplies the cost is determined on a First in First out (FIFO) basis, amounts in respect of which are not material.
(i) Investments:
i. Long term investments are carried at cost. Provision is made for diminution in value, other than temporary, on an individual basis.
ii. Current investments are carried at the lower of cost and fair value, determined on an individual basis.
(j) Taxes on income:
i. Tax expenses are accounted in the same period to which the revenue and expenses relate. Provision for current income tax is made for the tax liability payable on taxable income after considering tax allowances, deductions and exemptions determined in accordance with the prevailing tax laws. The differences between the taxable income and the net profit or loss before tax for the year as per the financial statements are identified and the tax effect of timing differences is recognised as a deferred tax asset or deferred tax liability. The tax effect is calculated on accumulated timing differences at the end of the accounting year, based on effective tax rates substantively enacted by the Balance Sheet date.
ii. Current tax assets and current tax liabilities are offset when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle the asset and the liability on a net basis. Deferred tax assets and deferred tax liabilities are offset when there is a legally enforceable right to set off assets against liabilities representing current tax and where the deferred tax assets and the deferred tax liabilities relate to taxes on income levied by the same governing taxation laws.
iii. Deferred tax assets, other than on unabsorbed depreciation and carried forward losses, are recognised only if there is reasonable certainty that they will be realised in the future and are reviewed for the appropriateness of their respective carrying values at each Balance Sheet date. In situations where the Group has unabsorbed depreciation and carried forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that the same can be realised against future taxable profits. Deferred Tax assets are reviewed at each Balance Sheet date for their realisability.
iv. Minimum Alternative Tax (“MAT”) credit is recognised as an asset only when and to the extent there is convincing evidence that the Group will pay normal income tax during the specified period. Such asset is reviewed at each Balance Sheet date and the carrying amount of the MAT credit asset is written down to the extent there is no longer a convincing evidence to the effect that the Company will pay normal income tax during the specified period.
(k) Accounting for Provisions, Contingent Liabilities and Contingent Assets:
Provisions are recognised in terms of Accounting Standard 29 – ‘Provisions, Contingent Liabilities and Contingent Assets’ (AS-29), notified by the Companies (Accounting Standards) Rules, 2006 (as amended), when there is a present legal obligation as a result of past events, where it is probable that there will be outflow of resources to settle the obligation and when a reliable estimate of the amount of the obligation can be made. Contingent liabilities are recognised only when there is a possible obligation arising from past events, due to occurrence or non-occurrence of one or more uncertain future events, not wholly within the control of the Group, or where any present obligation cannot be measured in terms of future outflow of resources, or where a reliable estimate of the obligation cannot be made. Obligations are assessed on an ongoing basis and only those having a largely probable outflow of resources are provided for. Contingent assets are not recognised in the financial statements.
161
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(l) Borrowing Costs:
General and specific borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use. Debenture issue costs and the premium on redemption of debentures are adjusted against the available Securities Premium Account in accordance with the provisions of section 78 of the Companies Act, 1956. All other borrowing costs are charged to Statement of Profit and Loss over the tenure of the borrowing.
Interest Rate Swap Contracts entered into to manage interest risks on borrowings, is accounted in the period in which it accrues as these contracts are intended to be held till the maturity of the underlying borrowing.
m) Cash and cash equivalents (for the purpose of cash flow statements):
Cash comprises cash on hand and demand deposits with banks. Cash equivalents are short-term balances (with an original maturity of three months or less from the date of acquisition), highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value.
n) Cash flow statement:
Cash flows are reported using the indirect method, whereby profit / (loss) before extraordinary items and tax is adjusted for the effects of transactions of non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from operating, investing and financing activities of the Group are segregated based on the available information.
o) Earnings per share:
Basic earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) by the weighted average number of equity shares outstanding during the year. Diluted earnings per share is computed by dividing the profit / (loss) after tax (including the post-tax effect of extraordinary items, if any) as adjusted for dividend, interest and other charges to expense or income (net of any attributable taxes) relating to the dilutive potential equity shares, by the weighted average number of equity shares considered for deriving basic earnings per share and the weighted average number of equity shares which could have been issued on the conversion of all dilutive potential equity shares.
p) Liability for redeemable points earned by guests under the loyalty programme of the Company is accrued as expenditure and is estimated on the redemption trends and the expected cost to be incurred in respect of the redeemable points.
q) Segment Reporting
The Group identifies primary segments based on the dominant source, nature of risks and returns and the internal organisation and management structure. The operating segments are the segments for which separate financial information is available and for which operating profit / loss amounts are evaluated regularly by the executive management in deciding how to allocate resources and in assessing performance.
The accounting policies adopted for segment reporting are in line with the accounting policies of the Group. Segment revenue, segment expenses, segment assets and segment liabilities have been identified to segments on the basis of their relationship to the operating activities of the segment.
Inter-segment revenue is accounted on the basis of transactions which are primarily determined based on market / fair value factors. Revenue, expenses, assets and liabilities which relate to the Group as a whole and are not allocable to segments on reasonable basis have been included under “unallocated revenue / expenses / assets / liabilities”.
162
Note 3 : Share capitalMarch 31, 2014
` croresMarch 31, 2013
` croresAuthorised Share Capital
Ordinary Shares100,00,00,000 (Previous year - 100,00,00,000) Ordinary Shares of ` 1/- each 100.00 100.00 Preference Shares1,00,00,000 (Previous year - 1,00,00,000) Cumulative Redeemable Preference Shares of ` 100/- each
100.00 100.00
200.00 200.00 Issued Share Capital
80,74,89,291 (Previous year - 80,74,89,291) Ordinary Shares of ` 1 /- each 80.75 80.75 80.75 80.75
Subscribed and Paid UpOrdinary Shares 80,74,72,787 (Previous year - 80,74,72,787) Ordinary Shares of ` 1 /- each, Fully Paid (Refer Footnotes iii, v and vi )
80.75 80.75
80.75 80.75
Footnotes :(i) The Company has one class of equity shares having a par value of ` 1 per share. Each shareholder is eligible for one
vote per share held. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting, except in the case of an interim dividend. In the event of liquidation, the equity shareholders are eligible to receive the remaining assets of the Company after distribution of all preferential amounts, in proportion to their shareholding.
During the year ended March 31, 2014, no dividend is proposed as distribution to equity shareholders (Previous year ` 0.80 per share)
(ii) The Board of Directors at its meeting held on March 27, 2014 has approved, subject to the approval of the shareholders of the Company, the re-classification of the authorised Share Capital of the Company comprising ` 200 crores divided into 100,00,00,000 equity shares of ` 1 each and 1,00,00,000 cumulative redeemable preference shares of ` 100 each into 200,00,00,000 equity shares of ` 1 each aggregating to ` 200 crores.
(iii) Reconciliation of the shares outstanding at the beginning and at the end of the year
March 31, 2014 March 31, 2013
No. of shares ` crores No. of shares ` crores
As at the beginning of the year 807,472,787 80.75 756,077,117 75.61
Add : Issued during the year - - 48,000,000 4.80
Add : Sale of Shares owned by Subsidiaries (Refer Footnote vi) - - 3,395,670 0.34
As at the end of the year 807,472,787 80.75 807,472,787 80.75
(iv) Shareholders holding more than 5% shares in the Company :
March 31, 2014 March 31, 2013
No. of shares % of Holding No. of shares % of Holding
Equity share of ` 1 each fully paid
Tata Sons Limited 202,052,004 25.02 202,052,004 25.02
Life Insurance Corporation of India 67,797,250 8.40 76,879,324 9.52
Sir Dorabji Tata Trust 50,221,040 6.22 50,221,040 6.22
Government Pension Fund Global 40,454,747 5.01
(v) 16,504 (Previous year - 16,504) Ordinary Shares were issued but not subscribed to as at the end of the respective years and have been kept in abeyance pending resolution of legal dispute.
(vi) The shares sold by subsidiary companies in the previous year, were aquired by them prior to their becoming subsidiaries.
163
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 4 : Reserves and surplusMarch 31, 2014 March 31, 2013
` crores ` crores
Capital Reserve
Opening and Closing Balance 43.97 43.97
Capital Reserve on Consolidation
Opening Balance 112.64 95.77
Add : Due to dilution of stake in a subsidiary - 16.87
Closing Balance 112.64 112.64
Capital Redemption Reserve
Opening and Closing Balance 10.59 10.59
Securities Premium Reserve
Opening Balance 2,095.14 1,667.09
Add : On allotment of shares on Warrant - 492.67
Less: Provision for Premium payable on redemption of Debentures (net of tax) - (63.66)
Less : Issue expenses written off (net of tax) (0.14) (0.96)
Closing Balance 2,095.00 2,095.14
Revaluation Reserve
Opening Balance 46.75 47.29
Add : Share in Revaluation Reserves of an associate company 0.18 (0.94)
Less : Depreciation (net of deferred tax) transferred during the year (0.68) (0.64)
Add : Foreign Exchange fluctuation for the year (net) 9.90 1.04
Closing Balance 56.15 46.75
Reserve Fund (In terms of Section 45-IC of the Reserve Bank of India Act,1934)
Opening Balance 33.60 31.35
Add : Transferred from Surplus in Statement of Profit and Loss 2.50 2.25
Closing Balance 36.10 33.60
Debenture Redemption Reserve
Opening Balance 440.97 440.97
Add : Transferred from Surplus in Statement of Profit and Loss (135.00) -
Closing Balance 305.97 440.97
Investment Reserve
Opening and Closing Balance 5.00 5.00
Investment Allowance Utilised Reserve
Opening and Closing Balance 4.03 4.03
Export Profits Reserve
Opening and Closing Balance 0.41 0.41
Hedge Reserve
Opening Balance (176.90) (118.22)
Add / (Less) : Exchange translation for the year (106.34) (58.68)
Closing Balance (283.24) (176.90)
carried over 2,386.62 2,616.20
164
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Opening Balance (25.56) 9.21 Add / (Less) : Exchange translation difference for the year (69.73) (44.02) Add / (Less) : Transferred to Statement of Profit and Loss on amortisation 29.10 9.25 Add : Share in Reserves of an associate company 0.10 - Closing Balance (66.09) (25.56)General Reserve
Opening Balance 562.60 557.59 Add : Transferred from Surplus in Statement of Profit and Loss 3.45 5.28 Less: Due to change in Associate reserves - (0.27) Closing Balance 566.05 562.60
Surplus in Statement of Profit and Loss
Opening Balance (862.50) (340.95) Add : Net Loss for the current year (553.85) (430.24) Add /(Less) : Adjustment on account of change in stake of Jointly Controlled
Entities / Subsidiary - (2.63)
Less : Transfer to Debenture Redemption Reserves 135.00 - Less : Transfer to General Reserve (3.45) (5.28) Less : Transfer to Reserve Fund (2.50) (2.25) Less : Dividend paid for previous year - (4.80) Less : Proposed Dividend - (64.60) Less : Tax on Dividend (7.24) (11.75) Closing Balance (1,294.54) (862.50)
2,555.71 2,898.53
Footnote :The Company has adopted hedge accounting principles to account for hedging of loans extended to subsidiaries forming a part of the Company’s net investment in non-integral foreign operations. Effectively, the Company had partially converted its rupee borrowings into foreign currency borrowings, using cross-currency swap derivative instruments, so as to cover the foreign currency fluctuations of its investments in overseas subsidiaries and the foreign currency borrowings.On application of the hedge accounting policy, the foreign currency translation differences of both, the hedging instrument (i.e. the borrowings) and the hedged item (i.e. the net assets in non-integral foreign operation), are recognised under Reserves and Surplus having due consideration to hedge effectiveness. Accordingly, the translation difference on the borrowings amounting to ` 106.34 crores (Previous year ` 58.68 crores) for year ended March 31, 2014 forming the effective portion of the hedge has been recognised in the Hedge Reserve Account in the Balance Sheet, whilst the corresponding translation differences of the net investment in non-integral foreign operation of ` 113.62 crores (Previous year ` 62.67 crores) for the year ended March 31, 2014 has been recognised under “Foreign Currency Translation Reserve Account” in the Balance Sheet.
165
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 5 : Long-term borrowingsMarch 31, 2014 March 31, 2013
Other loans and advances Unsecured Other loans and advances 2.60 2.98 Liability on currency swap contracts 203.69 162.86
206.29 165.84
Long term maturities of finance lease obligations Long term maturities of finance lease obligations 0.36 0.76
0.36 0.76
3,023.88 3,431.18
Footnote :
(i) Details of Borrowings as at: March 31, 2014 March 31, 2013
` crores ` crores Non-Current Current Non-Current Current
Debentures 1,376.00 210.00 1,586.00 60.00 Term Loans from Banks 1,441.23 730.77 1,677.72 77.71 Term Loans from Others - - 0.86 - Fixed Deposits - - - 0.60 Others 2.96 0.61 3.74 0.48 Liability on currency swap contracts 203.69 65.50 162.86 -
3,023.88 1,006.88 3,431.18 138.79 Short Term Borrowings (Refer Note 10) - 221.25 - 247.67 Total Borrowing 3,023.88 1,228.13 3,431.18 386.46
(ii) Secured debentures and term loans are secured by a pari passu first charge created on the fixed assets of respective components of the group.
166
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 6 : Deferred tax liabilities (net)
March 31, 2014` crores
March 31, 2013` crores
Deferred tax liabilities:
Depreciation on fixed assets 328.55 336.62
Unamortised borrowing cost 1.62 2.07
Others 5.01 8.41
Total (A) 335.18 347.10
Deferred tax assets:
Provision for doubtful debts 3.38 6.19
Premium on Redemption of Debentures 123.75 148.93
Provision for Employee Benefits 17.82 18.35
Depreciation on fixed assets (Refer Footnote i) 0.36 16.54
Others 24.29 28.30
Total (B) 169.60 218.31
Net Deferred tax liabilities (A-B) (Refer Footnote ii) 165.58 128.79
Footnotes :(i) Deferred tax asset on unabsorbed depreciation has been recognised by a subsidiary to the extent of deferred tax
liability arising on timing difference in respect of depreciation on fixed assets of that entity.(ii) Deferred Tax Assets of Nil (Previous year - ` 25.89 crores) has been adjusted against Securities Premium Reserve.
Note 7 : Deferred tax assets (net)
March 31, 2014` crores
March 31, 2013` crores
Deferred tax assets:
Provision for doubtful debts 1.04 1.10
Provision for Employee Benefits 0.50 0.46
Depreciation on fixed assets (Refer Footnote i) 3.18 3.68
Others 0.31 0.26
Total (A) 5.03 5.50
Deferred tax liabilities:
Depreciation on fixed assets 0.94 1.05
Total (B) 0.94 1.05
Net Deferred tax assets (A-B) 4.09 4.45
Footnotes :(i) Deferred tax assets and deferred tax liabilities of entities within the group have been offset as they relate to the
same governing taxation laws.
167
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(i) Secured loans from Bank consist of overdraft facilities. These are secured by hypothecation of operating supplies, stores, food and beverages and receivables
(ii) The Company had taken an unsecured short term loan from a bank of ` 200 crores carrying interest rate of 10.35% p.a. during the year. The Loan was drawn down in tranches of ` 100 crores each on July 25, 2013 and July 30, 2013 with a put / call option at the end of six months from the draw down date. The Company has repaid ` 50 crores on March 27, 2014. The outstanding as on March 31, 2014 is ` 150 crores.
(iii) Unsecured Short-term loans from other consists of inter-corporate deposits, Commercial paper and other loans.
168
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 11 : Other current liabilities
March 31, 2014 March 31, 2013
` crores ` crores
Current maturities of long-term borrowings (Refer Note 5 (i))
Debentures 210.00 60.00
Term Loans 730.77 77.71
Fixed Deposits - 0.60
Liability on currency swap contracts 65.50 -
Finance Lease Obligations 0.61 0.48
1,006.88 138.79
Payables on Current Account dues 21.95 18.24
Deposits 25.37 22.77
Interest accrued but not due on borrowings 43.30 44.38
Interest accrued and due on borrowings 1.38 1.21
Income received in advance 16.03 18.60
Advances collected from customers 101.21 96.44
Creditors for capital expenditure 25.43 19.41
Unclaimed dividends 3.80 3.87
Unclaimed Share Application Money 0.13 0.17
Unclaimed Matured Deposits and interest accrued thereon 2.07 2.68
Unclaimed matured debentures and interest accrued thereon ` 25,127 (Previous Year - ` 25,127)
- -
Other Liabilities 194.73 180.52
1,442.28 547.08
169
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 12 : Short-term provisions
March 31, 2014 March 31, 2013
` crores ` crores
Provision for Employees Benefits (Refer Note 39) 37.25 38.05
Provision - Others
Provision for Contingent Claims (Refer Footnote i) 114.38 30.85
At March 31, 2014 519.48 311.25 4,631.03 1,607.27 941.54 136.84 54.78 8,202.19
Depreciation (Refer Footnote vi)
At April 1, 2012 3.88 34.11 650.42 696.19 487.55 82.54 29.16 1,983.85
Translation Adjustment (Refer Footnote iii)
- 0.61 13.74 1.09 6.04 0.72 0.16 22.36
Addition on stake change (Refer Footnote vii)
- - 1.36 1.82 5.34 0.08 0.01 8.61
Charge for the year - 2.85 107.55 89.38 62.78 12.21 4.51 279.28
(Refer Footnote iv and v)
Disposals - - 0.43 12.63 15.08 2.41 0.77 31.32
At March 31, 2013 3.88 37.57 772.64 775.85 546.63 93.14 33.07 2,262.78
Translation Adjustment (Refer Footnote iii)
- 5.82 53.09 6.75 22.96 1.39 0.24 90.25
Charge for the year - 3.01 119.59 91.57 66.22 12.50 4.08 296.97
(Refer Footnote iv and v)
Disposals - - 0.35 14.51 12.43 4.22 2.13 33.64
At March 31, 2014 3.88 46.40 944.97 859.66 623.38 102.81 35.26 2,616.36
Net Block
At March 31, 2013 483.64 228.56 3,461.30 777.48 335.05 34.77 21.68 5,342.48
At March 31, 2014 515.60 264.85 3,686.06 747.61 318.16 34.03 19.52 5,585.83
Footnotes : (i) Gross Block includes buildings constructed on leasehold land and improvements thereto - ` 2,447.23 crores; (Previous year - ` 2,141.61
crores).(ii) Furniture, Fixtures and Office Equipments as at the year end include assets on finance lease: Gross Block - ` 1.59 crores; (Previous
year - ` 3.92 crores), Accumulated Depreciation - ` 0.09 crore. (Previous year ` 2.64 crores), Depreciation for the year - ` 0.04 crore (Previous year - ` 0.04 crore).
(iii) Adjustment on account of foreign exchange translation difference on opening balance and depreciation charge for the year is reflected as “Translation Adjustment”.
(iv) Depreciation charge for the year includes ` 0.05 crore (Previous year ` 0.04 crore) which is capitalised during the year.(v) Depreciation / Amortisation for the year includes ` 1.32 crores (Previous year ` 1.20 crores) recouped from Revaluation Reserve.(vi) Accumulated Depreciation includes adjustment for impairment of ` 6.79 crores (Previous year ` 6.61 crores) including ` 3.88 crores
(Previous year ` 3.88 crores) on Freehold Land, made in earlier years.(vii) Represent the impact of increase / decrease in share of the Group in certain jointly controlled entities for previous year.
171
Notes to Consolidated Financial Statements for the year ended March 31, 2014
` croresNote 14 : Intangible Assets
Goodwill Leasehold Property
Rights
Website Development
Cost
Software (Refer
Footnote i)
Management Contracts
Total
Gross Block at Cost
At April 1, 2012 4.76 28.32 4.11 27.89 54.99 120.07
At March 31, 2013 4.76 15.78 2.19 18.00 49.56 90.29
Translation Adjustment (Refer Footnote ii)
- 0.68 - - 5.19 5.87
Charge for the year - 2.97 0.88 5.37 3.31 12.53
Disposals - 1.00 - 0.85 - 1.85
At March 31, 2014 4.76 18.43 3.07 22.52 58.06 106.84
Net Block
At March 31, 2013 - 16.39 1.96 13.11 9.00 40.46
At March 31, 2014 - 15.17 1.84 24.83 7.03 48.87
Footnotes :
(i) Software includes Customer Reservation System and Licensed Software.
(ii) Adjustment on account of foreign exchange translation difference on opening balance and depreciation charge for the year is reflected as “Translation Adjustment”.
(iii) Represent the impact of increase / decrease in share of the Group in certain jointly controlled entities for previous year.
172
Notes to Consolidated Financial Statements for the year ended March 31, 2014
` crores ` croresTrade Investments : Equity Investments in Associate Companies (Refer Note 1(b) (iii))[Includes Goodwill of ` 70.80 crores (Previous year - ` 70.80 crores ) and is net of capital reserve of ` 0.68 crore (Previous year - ` 0.68 crore) arising on the acquisition of associates]
242.28 251.59
Investments in SharesQuoted (Refer Footnote i and ii) 1,617.46 1,468.08 Unquoted (Refer Footnote iii) 175.98 176.51
1,793.44 1,644.59 Investment in Government Security 0.02 0.02 Total Long Term Investments - Gross 2,035.74 1,896.20 Less : Provision for Diminution in value of Investments 716.46 373.59 Total Long Term Investments - Net 1,319.28 1,522.61 Footnotes :(i) Aggregate of Quoted Investments - Gross : Cost 1,617.46 1,468.08 : Market Value 774.42 428.86 (ii) The Board of Directors at its meeting held on November 8, 2013 decided not to pursue the offer made for acquisition
of Orient-Express Hotels Limited and in view of the above, the Group reviewed its carrying value of investment in Orient-Express Hotels Limited and considered it prudent to recognise a further diminution, other than temporary, of ` 304.61 crores and related bid costs incurred thus for amounting to ` 47.10 crores.
The above charges to the Statement of Profit & Loss have been classified as an “Exceptional item” for the current year.
(iii) Unquoted Investment, includes Investment in TRIL Infopark Limited for which transfer of shares are restricted due to an option granted for 10 years upto July, 2021 to Tata Realty and Infrastructure Ltd. for repurchase of the shares at par value. Tata Realty and Infrastructure Ltd. has deposited a sum of ` 71.10 crores (Previous year ` 71.10 crores) as Option Deposit, which shall be adjusted upon exercise of the option or refunded.
Note 16 : Long-term loans and advancesMarch 31, 2014 March 31, 2013
` crores ` crores(Unsecured, considered good unless stated otherwise)Capital advances 44.48 62.02 Long-term security deposits placed for Hotel Properties 139.95 136.96 Deposits with Public Bodies and Others 63.13 43.92 Loans and advances Considered good 41.70 69.35 Considered doubtful 58.31 -
100.01 69.35 Less : Provision for long-term doubtful advances 58.31 -
41.70 69.35 Other loans and advances Advance Income Tax paid (net) 123.71 101.88 MAT credit entitlement 37.47 52.85 Others loans and advance 9.45 9.44
170.63 164.17 459.89 476.42
173
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 17 : Other Non-Current AssetsMarch 31, 2014 March 31, 2013
Note 18 : Current InvestmentsMarch 31, 2014 March 31, 2013
` crores ` crores
Investments in Mutual Fund Units (Unquoted ) 107.93 40.69
Investments in Subsidaries (Refer Footnote )
BAHC 5 Pte Ltd. - -
1 (Previous year 1) equity shares of US $ 1 each (` 51 (Previous year ` 51))
Premium Aircraft Leasing Corporation Ltd. - -
10 (Previous year 10) equity shares of US $ 1 each (` 512 (Previous year ` 512))
107.93 40.69
Footnote :
These shares are held for disposal.
Note 19 : Inventories (At lower of cost and net realisable value)March 31, 2014 March 31, 2013
` crores ` crores
Food and Beverages 38.78 33.37
Stores and Operating Supplies 50.08 49.68
Apartment held for sale 13.21 13.69
102.07 96.74
Note 20 : Trade ReceivablesMarch 31, 2014 March 31, 2013
` crores ` crores
(Unsecured)
Outstanding over six months :
Considered good 22.41 25.61
Considered doubtful 14.97 22.77
37.38 48.38
Others :
Considered good 258.08 248.37
Considered doubtful 0.35 -
258.43 248.37
295.81 296.75
Less : Provision for Doubtful Trade Receivables 15.32 22.77
280.49 273.98
174
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 21 : Cash and bank balances.March 31, 2014 March 31, 2013
` crores ` croresCash and cash equivalentsCash on hand 5.30 4.79 Cheques, Drafts on hands 34.49 12.65 Balances with banks in current account 94.07 78.18 Balances with bank in call and short-term deposit accounts (original maturity less than 3 months) 19.38 27.98
153.24 123.60 Other Balances with banks :Call and Short-term deposit accounts 33.79 88.75 Deposits pledged with others 0.80 1.34 Margin money deposits 8.51 5.48 Earmarked balances 12.24 11.79
55.34 107.36 208.58 230.96
Less : Term deposit with banks maturing after 12 months from the Balance Sheet date and other earmarked / margin money / pledged deposits classified as non-current (Refer Note 17)
25.03 20.90
183.55 210.06
Note 22 : Short-term loans and advancesMarch 31, 2014 March 31, 2013
` crores ` crores(Unsecured, considered good unless stated otherwise) Short-term loans and advances 76.63 96.44 Deposit with public bodies and others 10.94 45.45 Other advances : Considered good 102.85 103.56 Considered doubtful 10.38 8.96
113.23 112.52 Less : Provision for doubtful advances 10.38 8.96
102.85 103.56 190.42 245.45
Note 23 : Other Current AssetsMarch 31, 2014 March 31, 2013
` crores ` croresInterest receivable 16.69 21.31 On Current Account dues 49.49 52.88 Unamortised Borrowing Costs Opening Balance 12.48 15.33 Add : Additions during the year 1.51 1.33 Add : Translation adjustment 0.92 0.27 Less : Amortised during the year (Refer Footnote) (4.40) (4.45) Closing Balance 10.51 12.48 Less : Unamortised borrowing costs - Non Current (Refer Note 17) 3.77 5.10
6.74 7.38 72.92 81.57
Footnote :Represents expenses on loans amortised over the tenure of the loan.
175
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 24 : Rooms, Restaurants, Banquets and Other Operating Income
March 31, 2014 March 31, 2013
` crores ` crores
Income from Operations 4,066.19 3,743.36
Other Operating Income - -
Total 4,066.19 3,743.36
Income from Operations is derived from the following :
March 31, 2014 March 31, 2013
` crores ` crores
Room Income 1,937.98 1,810.85
Food, Resturants and Banquet Income 1,660.10 1,498.70
Shop rentals 37.28 34.38
Membership fees 55.24 51.03
Management and operating fees 122.70 106.50
Others 252.89 241.90
Total 4,066.19 3,743.36
Note 25 : Other Income
March 31, 2014 March 31, 2013
` crores ` crores
Interest Income
Inter-corporate deposits 10.70 12.26
Deposits with banks 3.10 0.01
Interest on Income Tax Refunds 5.02 0.48
Others 6.20 6.29
Total 25.02 19.04
Dividend Income from long term Investments 9.51 5.57
Dividend Income from Current Investments 3.50 9.03
Profit on sale of current investments (Net) 0.04 0.75
Exchange Gain (Net) 0.52 -
Others 21.16 25.77
Total 59.75 60.16
Note 26 : Employee benefit expenses and Payment to Contractors
March 31, 2014 March 31, 2013
` crores ` crores
Salaries, Wages, Bonus etc. 1,086.12 981.19
Company’s Contribution to Provident & Other Funds (Refer Note 39 and Footnote below) 40.93 48.62
Reimbursement of Expenses on Personnel Deputed to the Company 32.41 37.50
Payment to Contractors 94.42 86.72
Staff Welfare Expenses 118.31 117.72
Total 1,372.19 1,271.75
Footnote :
Includes ` 0.53 crore (Previous year ` 0.40 crore) in relation to unfunded gratuity.
176
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 27 : Finance costsMarch 31, 2014 March 31, 2013
` crores ` croresInterest ExpenseInterest Expenses on borrowings 223.18 218.78 On Income Tax Demand 0.02 6.58
223.20 225.36 Less : Interest recovered on Currency swaps relating to above 30.30 34.13 Less : Interest Capitalised (Refer Footnote) 24.39 20.49 Total 168.51 170.74 Footnote :The Group has capitalised the interest cost on borrowings utilised for projects under construction, relating to assets in capital work in progress
Note 28 : Operating and general expenses
March 31, 2014 March 31, 2013` crores ` crores
(i) Operating expenses consist of the following : Linen and Room Supplies 70.89 63.43 Catering Supplies 36.23 35.04 Other Supplies 8.69 7.99 Fuel, Power and Light 311.15 288.80 Repairs to Buildings 52.03 43.88 Repairs to Machinery 69.25 52.46 Repairs to Others 32.36 40.11 Linen and Uniform Washing and Laundry Expenses 48.48 43.77 Payment to Orchestra Staff, Artistes and Others 32.09 28.30 Guest Transportation 9.91 9.30 Travel Agents’ Commission 67.83 55.70 Discount to Collecting Agents 47.36 44.51 Other Operating Expenses 136.40 119.94 Total 922.67 833.23 (ii) General expense consist of the following : Rent 60.07 61.01 Licence Fees 208.15 197.11 Rates and Taxes 93.58 78.75 Insurance 19.12 20.00 Advertising and Publicity 130.26 126.00 Printing and Stationery 15.68 15.04 Passage and Travelling 21.14 20.23 Provision for Doubtful Debts and advances 4.28 7.80 Professional Fees 55.49 52.69 Support services 40.93 31.02 Exchange Loss (Net) - 0.95 Loss on Sale of Fixed Assets (Net) 2.37 4.22 Provision Diminution in Value of Investment 0.30 0.50 Payment made to Statutory Auditors (Refer Footnote) 9.11 7.75 Directors’ Fees and Commission 3.08 2.88 Other Expenses 121.13 93.24 Total 784.69 719.19
1,707.36 1,552.42
177
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Footnotes :
Payment made to Statutory Auditors:
March 31, 2014 March 31, 2013
` crores ` crores
As auditors * 6.49 5.52
For other services (including tax audit and company law matters) 2.53 2.16
Expenses and incidentals 0.09 0.07
9.11 7.75
* Excludes ` 0.14 crore adjusted against Securities Premium Account
Note 29 : Exceptional Items
March 31, 2014 March 31, 2013
` crores ` crores
Exceptional Items comprises of the following :
Exchange Gain / (Loss) on long term borrowings/assets (Refer Footnote) (29.15) (20.72)
Provision for diminution in value of long term investments (Including bid cost incurred so far) (Refer Note 15 (ii))
(351.71) (373.00)
Provision for contingency arising out of financial exposure in an associate (100.47) (27.55)
Provision for contingency for property tax (19.04) -
Project written off for commercial reason (29.78) -
Provision for diminuation in long term advances by a jointly controlled entity (21.42) -
Voluntary Retirement Scheme expenses of a subsidiary (3.27) -
Profit on sale of investment by subsidiaries of holding company shares - 13.95
Exchange difference on revaluation of long-term foreign currency monetary items.
Note 30 : Shareholder’s Agreement of a subsidiary:
As per the Share Subscription Agreement and Shareholders’ Agreement dated March 16, 2011 entered into with Omega TC holding Pte Limited (“Investor”) by a subsidiary company, read with addendum to Subscription Agreement dated March 25, 2014 and subject to the terms and conditions stated therein, the subsidiary has issued 5,555,556 equity shares of ` 10 for a total consideration of ` 50 crores on March 27, 2013.
The investor also has an option but not the obligation to subscribe for further such number of Equity Shares as is equal to the aggregate consideration of upto ` 100 crores on or before December 31, 2015, provided that the subsidiary company requires an amount equivalent to the consideration and such requirement is a part of business plan.
Note 31 : Contingent Liabilities (to the extent not provided for) :
(a) On account of Income Tax matters in dispute :
In respect of tax matters for which Group appeals are pending ` 57.70 crores (Previous year ` 68.92 crores). The said amounts have been paid / adjusted and will be recovered as refund if the matters are decided in favour of companies of the Group.
In respect of other tax matters ` 0.08 crore (Previous year ` 0.05 crore)
178
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(b) On account of other disputes in respect of :
March 31, 2014 ` crores
March 31, 2013 ` crores
Luxury tax 3.82 3.60
Entertainment tax 2.40 0.03
Sales tax / VAT 27.88 21.61
Property and Water tax 30.00 13.45
Stamp Duty - 0.60
Service tax 42.57 33.27
Excise 20.64 21.14
Others 10.31 5.39
The Group is a defendant in various legal actions and a party to claims as above, plus interest thereon, which arose during the ordinary course of business. The Group’s management believes based on the facts presently known, that the results of these actions will not have a material impact on the Company’s financial statements. It is not practicable for the Group to estimate the timings of cash flows, if any, in respect of the above.
(c) Other claims against the Group not acknowledged as debt :
Legal and statutory matters ` 0.37 crores (Previous year ` 2.69 crores)
(d) In respect of a plot of land provided to the Company under a license agreement, on which the Company has constructed a hotel, the licensor has made a claim of ` 229.70 crores to date, (13 times the existing annual rental) for increase in the rentals with effect from 2006/07. The Company believes these claims to be untenable. The Company has contested the claim, based upon legal advice, by filing a suit in the Honourable Bombay High Court on grounds of licensor’s inconsistent stand on automatic renewal of lease, levy of lease rentals and method of computing such lease rent, based on the existing license agreement as also a Supreme Court judgment on related matters. Even taking recent enactments into consideration, in the opinion of the Company, the computation cannot, under any stretch, be more than ` 48.56 crores (excluding interest / penalty), and this too is being contested by the Company on merit.
Further, a “Notice of Motion” has been issued by the Honourable Bombay High Court, inter alia, for a stay against any further proceedings by the licensor, pending a resolution of this dispute by the Honourable Bombay High Court. In view of this, and based on legal advice, the Company regards the likelihood of sustainability of the lessor’s claim to be remote and the amount of any potential liability, if at all, is indeterminate.
In some hotels, proposed revisions in property taxes are contested by the Company, amounts of which are indeterminate.
(e) The Group had spent ` 8.13 crores in one of the hotel property at Ludhiana taken on operating lease which has a remaining written down value of ` 5.52 crores as at Balance Sheet date. The Group had, after taking legal advice, suspended its operations & further given a termination notice to end the lease contract due to non-fulfilment of obligations by the landlord to provide critical services such as electricity, power backup, security etc. for the mall including the Hotel and not adapting good engineering practices in the construction of the Hotel Building. The landlord has disputed the validity of the notice and has raised a claim for ` 44.12 crores towards arrear rentals, Common Asset Management charges and rental for period between August, 2012 till October, 2038.
Further, the landlord has also sought for appointment of an arbitrator before the High Court of Delhi as per the arbitration clause in the Agreement to Lease which the group is disputing and have challenged the applicability of arbitration clause as the Agreement to Lease was not registered in accordance with the relevant authority. The counter affidavit and rejoinder thereto have also been filed in the Hon’ble Court by the Group and the Petitioner respectively and the Arbitration Petition is pending arguments. In the meantime, the Group has filed a suit seeking relief to restrain the landlord from preventing the Group from removing its moveable assets from the said property. Based on the discussions and legal advice sought by the Group from senior lawyers, the Group feels that it has a good case to recover the initial investment /damages from the owner and it also intends to file a suit for damages against the landlord. In view of the above, the Group feels confident not to have any loss on account of the amount invested in the property and based on the facts of the case and the supporting law liability for claims raised by the landlord can be defended.
179
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 32 : Capital Commitments
Estimated amount of contracts remaining to be executed on capital account net of capital advances and not provided for is ` 244.84 crores (Previous year – ` 240.94 crores).
Note 33 : Other Commitments
(a) The Company owns 19.90% of the issued share capital of Lands End Properties Private Limited (“LEPPL”), a Company owning 67% interest in the erstwhile Sea Rock hotel property through its wholly-owned subsidiary, Sky Deck Properties & Developers Private Limited (“SDPDPL”). LEPPL has issued zero coupon Non-Convertible Debentures aggregating to ` 521 crores, redeemable at a premium, having a yield to maturity of 10% per annum. LEPPL has a call option on this borrowing, and thus the right to early redemption of such Debentures on February 13, 2015, with an additional redemption premium of 0.15% of nominal value (principal value). In the event, this option of early redemption is not exercised by LEPPL, the obligation of LEPPL on such Debentures, on its maturity, would aggregate to ` 693.45 crores. However, the call option can only be exercised with prior written consent from the Company.
In respect of such debentures issued by LEPPL, the Company has :-
i. the first right to purchase the entire shareholding of SDPDPL held by LEPPL for an aggregate value of ` 693.45 crores; or
ii. the obligation to make good the value of the shortfall, if any, if lenders of LEPPL divest 100% of SDPDPL shares and realise an amount lower than the redemption amount, in case the right referred in (i) above is not exercised.
In addition, SDPDPL has availed of a secured zero coupon term loan of ` 508 crores from a financial institution for which the total repayment obligation on the maturity date (being January 28, 2016) would be ` 708.93 crores. This term loan has been secured by way of a pledge on all direct and indirect shareholding of ELEL.
In effect, the total future repayment obligation for LEPPL, on a consolidated basis, aggregates to ` 1402.38 crores covering the current outstanding debt obligations of LEPPL and SDPDPL, its underlying subsidiary.
(b) The Company had given an option to certain shareholders of ELEL Hotels & Investment Ltd. (“ELEL”), a company having an underlying lease of the Hotel Sea Rock Property as under:-
Shareholders holding 5,26,854 shares in ELEL would have had an option to sell these shares to the Company upon the achievement and fulfilment of certain conditions. The intent states that the option would have been exercisable by the shareholders at a predetermined price, based on the obligations actually fulfilled by the holders of these shares. The holders of these shares are entitled to exercise this Put option on January 1, 2014 (not exercised) or July 1, 2014. In parallel, the Company also has an option to purchase these shares at the same price on April 1, 2014 (not exercised) or September 1, 2014.
Given the non-fulfilment of conditions as at date as well as the uncertainty in achieving these conditions going forward, the resolution of this Put/ Call option with respect to timing, price and resultant liability remains indeterminate.
(c) In case of one of the jointly controlled entity, as per the share purchase agreement it has given a commitment to pay for the uncalled amount of ` 15.51 crores (previous year: ` 13.67 crores) towards the acquisition of 2,21,62,500 shares (previous year: 1,95,37,500 shares) of Greenwoods Palaces & Resorts Pvt. Ltd.
(d) The Company has given letters of support in case of select associate and Jointly controlled companies during the year.
Note 34 : Guarantees and Undertakings given:
(a) The Group has given an undertaking to a lender of Taj Air Limited (“TAL”) not to transfer, assign, dispose of or encumber its holding in the shares of TAL without the said lender’s prior written approval except for changes in the shareholding of TAL between specified entities.
(b) The Group has pledged its investment in BAHC 5 Pte Ltd. (“BAHC 5”) with a net book value of US$ 1 and issued guarantees in respect of a loan from a third party to BAHC 5 for losses that it might incur as a result of granting the
180
Notes to Consolidated Financial Statements for the year ended March 31, 2014
loan to BAHC 5 to the extent of approximately ` 420.07 crores (US$70 million) without charge. As at the end of the Balance Sheet date, the Group does not consider it probable that a claim will be made against the Company under these guarantees. The maximum liability of the Company at the end of the reporting period under these guarantees is approximately ` 420.07 crores (US$70 million), representing the loan drawn down by BAHC 5 as at the end of the reporting period.
(c) The Group has pledged its investment in St James Courts Hotel Limited with a net book value of ` 256.78 crores (US$ 42.79 million) and issued guarantees without charge in respect of a bank loan to Bjets Pte Ltd (“Bjets”) for losses that might incur as a result of granting the loan to Bjets to the extent of approximately ` 142.82 crores (US $ 23.8 million). In the opinion of management, since Bjets owns several aircrafts having an estimated market value of ` 82.21 crores (US$ 13.7 million) which could be used to settle bank loan, the management made the provision for its obligation towards the financial guarantee for the remaining balance of ` 60.00 crores (US$ 10.01 million) accordingly which is disclosed under Note 12 in “Provision for contingencies”
(d) The Group, together with an associate and a third party entered into an agreement with the bank, in consideration for the lender providing a credit facility of up to ` 48.87 crores (US $9 million) to Lanka Island Resorts Limited, an associate of the Group. The Group has agreed to execute a shortfall undertaking and a non-disposal undertaking for shares in Lanka Island Resorts Limited in favour of the bank as security for repayment of credit facilities and monies payable by the associate to the bank under the facility agreement and performance and observance by the bank of all its obligations and covenants under the Facility Agreement.
(e) Guarantees given by the Group in respect of loans obtained by other companies and outstanding as on March 31, 2014 - ` 89.08 crores (Previous year - ` 24.05 crores).
Note 35 : Operating and Finance Leases
(a) IHMS Inc. a wholly owned subsidiary of the company, formed IHMS LLC (“New York LLC”) under the laws of the State of Delaware, U.S.A. The New York LLC was formed to acquire the lease with 795 Fifth Avenue Corporation, its affiliates 795 Fifth Avenue Limited Partnership, Barneys New York and individual apartment owners, which encompass the facilities of the Hotel Pierre.
The New York LLC has entered into lease agreements for the use of various facilities at the Hotel Pierre for the purpose of operating a hotel business. Under the terms of the various Agreements, the New York LLC is required to:
(i) Provide an irrevocable unconditional letter of credit in the amount of ` 30.00 crores (US $ 5 million), as to be renewed annually until expiration of the lease.
(ii) Spend not less than ` 210.03 Crores (US $35 million) on renovations of the property not later than June 30, 2007.
(iii) In November 2007, the New York LLC entered into a lease modification agreement with its landlord. The principal modification extended the lease term for an additional 10 years, to June 30, 2025, and increased the New York LLC’s renovation commitment to ` 480.08 crores (US $80 million). The New York LLC spent approximately ` 627.94 crores (US $104.64 million) towards the renovation project and substantially completed the renovation project on June 30, 2010
Future fixed and minimum rentals, exclusive of formula or percentage rentals for the period ending March 31, are approximately as under:-
March 31, 2014 ` crores
March 31, 2013 ` crores
Not later than one year 11.82 10.69
Later than one year but not later than five years 47.26 42.77
Later than five years 73.85 77.52
181
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(iv) Lease on cooperative apartments and ballroom
The New York LLC assumed a lease agreement with Barney’s New York, which was originally scheduled to expire in August 2013, for the use of Hotel Pierre’s ballroom, and with some other individuals for the use of their cooperative apartments as hotel rooms and suites. Such leases require the New York LLC to pay minimum rent which increase annually by the change in the Consumer Price Index and to reimburse the owners for their actual cooperative maintenance charges. On March 12, 2012, the lease agreement with Barney’s was amended wherein, among other things, the scheduled expiration was extended to December 31, 2018 and the annual fixed rent was increased to US$ 1,700,000 (“Amended Lease Agreement). In addition, the Amended Lease Agreement required a one-time rent adjustment fee of US$ 1,000,000 (“Rent Adjustment”). The Rent Adjustment is included in intangible as lease acquisition rights and will be expensed over the term of the Amended Lease Agreement. Accumulated amortisation of the Rent Adjustment amounted to ` 1.88 crores (US $313,251) and ` 0.92 crores (US$ 1,68,672) at March 31, 2014 and March 31, 2013 respectively. Future fixed minimum rentals, exclusive of formula or percentage rentals for the years ending March 31 are approximately as follows:
March 31, 2014 ` crores
March 31, 2013 ` crores
Not later than one year 10.99 9.94
Later than one year but not later than five years 39.83 39.06
(v) IHMS New York LLC, IHMS San Francisco LLC and IHMS Boston LLC, as lessors under various operating leases, will receive base rents over the next five years and, in the aggregate, over the remaining terms of the leases as follows :-
San Francisco LLC Boston LLC New York LLC Total` crores ` crores ` crores ` crores
Not later than one year 0.42 2.61 1.99 5.030.35 2.36 1.88 4.59
Later than one year but not 0.26 13.41 8.38 22.05later than five years 0.50 7.48 7.52 15.50Later than five years - 22.55 3.64 26.19
- - 5.17 5.17
Figures in italics are in respect of previous year
(b) Apart from the operating lease as mentioned in Note 35 (a) above, the Group has also taken certain assets on operating lease, the minimum future lease rentals payable on which are as follows:
March 31, 2014 ` crores
March 31, 2013 ` crores
Not later than one year 46.79 41.92Later than one year but not later than five years 177.72 160.83Later than five years 1260.26 1,165.20
A subsidiary company is liable, in certain cases, to pay variable rent based on fulfilment of certain operational parameters. The total amount charged to Statement of Profit and Loss in respect thereof is ` 0.55 crore (previous year ` 0.32 crore)
(c) The Group has taken assets on finance lease, certain assets, the minimum future lease rentals on which are as follows:
March 31, 2014 ` crores
March 31, 2013 ` crores
Not later than one year 0.58 0.45Later than one year but not later than five years 0.21 0.60Later than five years - -Total 0.79 1.05
182
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 36 : Derivative Instruments and Un-hedged Foreign Currency Exposure:
The Company uses forward exchange contracts, interest rate swaps, currency swaps and options to hedge its exposure in foreign currency and interest rates. The information on derivative instruments is as follows:-
(a) Derivative Instruments outstanding :
Nature of Derivative Risk HedgedMarch 31, 2014 March 31, 2013
Currency million ` crores Currency million ` crores
* Net of notional amount of US$ 186.38 million (previous year – US$ 186.38 million) as cross currency interest rate swaps referred to in footnote Note no 4.
The Company has exercised the option granted vide notification No. G.S.R.225(E) dated March 31, 2009, issued by the Ministry of Corporate Affairs and subsequent Notification No G.S.R.378(E) (F.No17/133/2008-CL.V) dated May 11, 2011 and Amendment Notification No G.S.R.914(E) dated December 29, 2011 incorporating the new paragraph 46(A) relating to Accounting Standard (AS) 11 “The Effects of Changes in Foreign Exchange Rates” and accordingly, the exchange differences arising on revaluation of long term foreign currency monetary items for the year ended March 31, 2014 have been accumulated in “Unamortised Foreign Currency Monetary Item Translation Difference” and amortised over the balance period of such long term asset or liability, by recognition as income or expense in each of such periods. Foreign currency monetary items outstanding as at March 31, 2014 are accounted as per Company’s Policy on Transactions in Foreign Exchange (Refer Note 2(f)).
Note 38 :
The Company, on a review of its foreign operations had, in the past, made voluntary disclosures to the appropriate regulator, of what it considered to be possible irregularities, in relation to foreign exchange transactions relating to period prior to 1998. Arising out of such disclosures, the company received show cause notices. The Company has replied to the notices and is waiting for the directorate to return its files, after which it will complete the replies. Adjudication proceedings are in progress.
Note 39 : Employee Benefits :
(a) The Group has recognised the following expenses as defined contribution plan under the head “Company’s Contribution to Provident Fund and Other Funds”:
March 31, 2014 ` crores
March 31, 2013 ` crores
Provident Fund (includes Pension cost) 31.24 29.26
Superannuation Fund 6.19 6.80
Total 37.43 36.06
183
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Multi-Employer Benefit Plans
One of the international subsidiaries, IHMS Inc. along with its two LLP’s namely “the New York LLC” and “the Boston LLC” participates in the multi-employer plans with the Industry Wide Plan (“IWP”). The New York LLC is a party to the Industrywide Collective Bargaining Agreement between the New York Hotel Trades Council (“NYC Union”) and the Hotel Association of New York City, Inc. The Boston LLC, along with certain other hotel operators and owners in Boston, Massachusetts, is a party to the Collective Bargaining Agreement with UNITE HERE Local 26 (“Boston Union”). The respective collective bargaining agreements provide for Union sponsored multi-employer defined benefit plans (the “Plans”) to which the New York LLC and the Boston LLC make contributions for the benefit of their employees covered by the collective bargaining agreements. The New York LLC and the Boston LLC have not received information from the Plans’ administrators to determine their share of unfunded benefit obligations, if any. The New York LLC and the Boston LLC have not undertaken to terminate, withdraw or partially withdraw from the Plans. The risks of participating in the multi-employer plan are different from a single-employer plan in the following aspects:
a. Assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers.
b. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers.
c. If an employer chooses to stop participating in some of its multi-employer plans, the employer may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
The New York LLC’s and the Boston LLC’s participation in the Plans for the years ended March 31, 2014 and 2013 is outlined in the table below. The “EIN Number” column provides the Employer Identification Number (EIN). The most recent Pension Protection Act (PPA) zone status available in 2013 is for the Plans’ year-end at December 31, 2013. The zone status is based on information that the New York LLC and the Boston LLC received from the Plans and is certified by the actuaries of the Plans. Among other factors, pension plans in the red zone are generally less than 65% funded, pension plans in the yellow zone are less than 80% funded, and pension plans in the green zone are at least 80% funded.
The “FIP/RP Status Pending/Implemented” column indicates pension plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is pending or has been implemented. The New York LLC’s and the Boston LLC’s contributions to its respective Plans did not exceed more than 5% of the total contributions to the Plans by all participating Employers
The following is a summary of the Plans to which the New York LLC and the Boston LLC make contributions for the benefit of their employees covered by the collective bargaining agreements.
Pension Protection Act Zone Status FIP/RP Status
Pending/ Implemented
Contribution by the Company
Plans EIN Number Plan Number 2013 2012 2013
US $2012 US $
New York LLCPension Fund (1) 13-1764242 001 Yellow Yellow Yes 2,962,984 2,205,338Health Benefits Fund (2) 13-6126923 501 NA NA Yes 6,143,209 5,436,184
Prepaid Legal Services Fund (3) 13-3418414 508 NA NA Yes 117,194 20,921
Total - New York LLC 9,223,387 7,662,443Boston LLCPension Fund (4) 45-4227067 001 Yellow Yellow Yes 303,375 292,872Health Benefits Fund (5) 04-6048964 501 NA NA Yes 2,925,334 2,781,701
Other Fund 131,409 120,343Total - Boston LLC 3,360,118 3,194,916
12,583,505 10,857,359
184
Notes to Consolidated Financial Statements for the year ended March 31, 2014
1. New York Hotel Trades Council and Hotel Association of New York City, Inc. Pension Fund
2. New York Hotel Trades Council and Hotel Association of New York City, Inc. Health Benefits Fund
3. New York Hotel Trades Council and Hotel Association of New York City, Inc. Prepaid Legal Services Fund
4. Unite Here Local 26 Workers & Hospitality Employers VDB Pension Trust
5. Greater Boston Hotel Employees Local 26 Health and Welfare Plan
Defined Contribution 401(k) Plans
IHMS Inc and its LLC (Subsidiaries) have defined contribution plans for the benefit of their eligible employees pursuant to Section 401(k) of the Internal Revenue Code. In addition to employee 401(k) contributions, the plans require employer contributions of 3% of each eligible participant’s plan compensation for each year. The employer may also make a profit sharing contribution of a uniform percentage of eligible participants’ plan compensation based on profits as defined. The employer contributions charged to the Company’s and the Subsidiaries’ operations for the years ended March 31, 2014 and 2013 are as follows:
March 31, 2014 US $
March 31, 2013 US $
San Francisco LLC 113,738 97,719
Boston 220,253 213,584
New York LLC 176,729 152,802
Company 48,794 47,980
Total Employer Contributions 559,514 512,085
(b) The Group operates post retirement defined benefit plans as follows :-
i. Funded :
• Post Retirement Gratuity.
• Pension to Employees – Post retirement minimum guaranteed pension scheme for certain categories of employees, which is funded by the Company and the employees.
ii. Unfunded :
• Post Retirement Gratuity.
• Pension to Executive Directors and Employees – Post retirement minimum guaranteed pension scheme for certain retired executive directors and certain categories of employees, which is unfunded.
• Post-Employment Medical Benefits to qualifying employees.
• Post-Employment Compensated Absence Benefit for certain categories of employees.
(c) Pension Scheme for Employees:
The Company has formulated a funded pension scheme for certain employees. The actuarial liability arising on the above, after allowing for employees’ contribution is determined as at the year end, on the basis of uniform accrual benefit, with demographic assumptions taken as Nil.
185
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(d) Defined Benefit Plans :
The disclosure given below exclude amount of entities who have not obtained such information as these have been classified as small and medium company and have been exempt from making such disclosure :-
(i) Amount to be recognised in Balance Sheet and movement in net liability
(vii) Effect of Change in Assumed Health Care Cost
1% Increase 1% Decrease
` crores ` crores
Effect on the aggregate of service cost and interest cost - -(1% increase - ` 40,774) (1% Decrease – (` 45,556)) PY (1% increase - ` 48,651) (1% Decrease – (` 42,691))
- -
Effect of defined benefit obligation0.05 (0.05)
0.06 (0.05)
188
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(viii) Experience Adjustments
2013/14 2012/13 2011/12 2010/11 2009/10
` crores ` crores ` crores ` crores ` crores
Defined Benefit Obligation 204.34 211.80 196.05 146.92 125.93
Plan Assets 186.66 186.10 168.98 138.50 118.68
Deficit (14.03) (13.98) (16.01) (8.42) (7.25)
Experience Adjustment on Plan Liabilities 2.25 21.86 21.12 5.26 3.08
Experience Adjustment on Plan Assets (0.63) 7.32 (0.55) 0.26 9.54
Footnote : Figures in italics under (i) to (vii) are of the previous year.
The estimate of future salary increases, considered in actuarial valuation, takes into account inflation, seniority, promotions and other relevant factors. The above information has been certified by the actuary and has been relied upon by the Auditors.
Note 40 : Related Party Disclosures :
(a) The names of related parties of the Group are as under:
i. Company having substantial interest
Tata Sons Ltd.
ii. Associates and Jointly Controlled Entities
The names of all the associates and jointly controlled entities are given in Note 1 (b)
iii. Co-venturer
Singapore Airport Terminal Services Ltd. (SATS)
Malaysian Airline Systems Berhad.
Kerala Tourism Infrastructure Ltd.
Zinc Holdings Inc.
And Beyond Holdings Pty. Ltd.
His Excellency Governor of Karnataka.
Corormandel Beach Properties Pvt. Ltd.
Caspian Capital & Finance Ltd.
Tata Africa Holding (Pty) Ltd.
iv. Key Management Personnel
Key managerial personnel comprise the whole-time directors of the Company, who have the authority and responsibility for planning, directing and controlling the activities of the Company and the Group.
v. Following are the Key Management Personnel:
Designation
Raymond N Bickson Managing Director
Anil P Goel Executive Director – Finance
Abhijit Mukerji Executive Director - Hotel Operation
Mehernosh S Kapadia Executive Director - Corporate Affairs
189
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(b) Details of related party transactions during the year ended March 31, 2014 and outstanding balances as at March 31, 2014:Company having
Balances outstanding at the end of the yearTrade receivables 0.05 - 22.07 0.24
0.96 - 21.45 0.19Trade payables 0.03 - 4.67 0.32
2.85 - 2.54 0.44Due from/(to) on Current A/c 0.30 - 29.47 -
- - 15.61 (0.03)Interest Receivable - - 1.71 -
- - 4.41 -Interest Payable - - 0.30 0.11
- - 0.35 -Deposits (Net) - - 9.58 (6.68)
- - 37.16 -Loans Outstanding (Net) - - 91.50 0.03
- - 25.83 (7.31) Footnotes :
(i) Figures in italics are of the previous year. (ii) Managerial remuneration excludes provision for gratuity and compensated absences, since these are provided
on the basis of an actuarial valuation of the Company’s liability to all its employees.
190
Notes to Consolidated Financial Statements for the year ended March 31, 2014
(c) Statement of Material Transactions
Company Name March 31, 2014 ` crores
March 31, 2013 ` crores
Company having substantial interest
Tata Sons Limited
Allotment of Shares - 497.47
Dividend Received 3.60 3.60
Dividend Paid 16.16 19.67
Sale of goods and services - 2.31
Trade Payables - 2.85
Tata Quality Management Services
Sale of goods and services - 0.82
Remuneration to Key Management Personnel
Mr. Raymond Bickson 10.40 10.33
Mr. Anil P. Goel 2.37 2.17
Mr. Abhijit Mukerji 2.08 1.99
Mr. Mehernosh S. Kapadia 1.65 1.15
Associates
Oriental Hotels Ltd.
Interest paid/provided - 0.47
Interest received/accrued 1.66 0.69
Interest Payable - 0.35
Dividend Received 3.59 1.52
Operating/Licence Fees Paid 2.38 1.00
Operating/Licence Fees Received 23.69 23.43
Purchase of goods and services - 0.92
Sale of goods and services 3.09 3.05
Due on current account (Net) – Payable 3.61 2.20
Trade Receivables 8.31 9.07
Trade Payables 4.03 -
ICD Placed during the year 21.50 21.75
ICD Encashed during the year 36.00 7.25
ICD raised during the year - 9.00
ICD repaid during the year - 14.50
ICD Closing Position - Receivable - 14.50
ICD Closing Position - Payable - 2.48
Deposits (Net) 3.48 -
191
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Company Name March 31, 2014 ` crores
March 31, 2013 ` crores
Taida Trading & Industries Ltd.
Interest received/ accrued 0.92 0.72
Interest Receivable 0.66 1.21
Deposits(net) 1.43 -
ICD Placed during the year 1.35 -
ICD Closing Position - Receivable 8.04 8.04
Lanka Island Resorts Ltd.
Operating/Licence Fees Received 2.37 -
Trade Receivables 2.28 -
TAL Lanka Hotels Plc
Trade Receivables 0.87 -
BJets Pte Ltd.
Interest received/accrued 1.39 0.77
Interest Receivable - 1.15
Due on current account (Net) – Payable 0.86 -
ICD Placed during the year 18.95 -
Loans given outstanding 73.95 16.31
Jointly Controlled Entities (to the extent of Co-venturer share)
Taj GVK Hotels & Resorts Ltd.
Dividend Received - 1.79
Operating/Licence Fees Received 10.57 11.36
Due on current account (Net) – Payable 2.05 1.48
Trade Receivables 5.61 4.43
Purchase of Goods & Services - 0.31
ICD Encashed during the year 5.00 -
Kaveri Retreats and Resorts Ltd.
Interest received/ accrued 1.22 0.83
Operating/Licence Fees Paid 0.62 -
Deposits (Net) 6.68 -
Due on current account (Net) – Payable 0.66 -
Trade Receivables 1.28 -
ICD Placed during the year 5.60 4.57
ICD Encashed during the year 5.25 -
ICD Closing Position - Receivable - 9.13
TAL Hotels & Resorts Ltd.
Operating/Licence Fees Received 5.40 2.85
Loans given outstanding 6.53 5.92
Interest Receivable - 0.53
192
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Company Name March 31, 2014 ` crores
March 31, 2013 ` crores
Taj Kerala Hotels & Resorts Ltd.
Operating/Licence Fees Received 1.37 -
Trade Receivables 0.81 -
Sale of Goods & Services - 0.19
Purchase of Goods & Services - 0.03
Taj Madras Flight Kitchen Pvt. Ltd.
Interest paid/provided - 0.29
Sale of Goods & Services - 0.16
ICD raised during the year - 2.50
ICD repaid during the year - 5.00
Taj Karnataka Hotels & Resorts Ltd.
Interest Receivable - 0.85
Loans & Advances receivable - 2.98
Taj Safaris Ltd.
Due on current account (Net) – Payable 1.46 -
ICD Placed during the year 3.00 -
Deposits (Net) 2.95 -
ICD encashed during the year - 1.72
IHMS Hotels (SA) (Proprietary) Ltd.
Due on current account (Net) – Receivable 26.60 18.30
Subscription of Shares 14.62 0.24
Trade Receivables 1.67 -
Investing parties
Malaysian Airlines Systems
Sale of goods and services 1.52 1.51
Coromandel Beach Properties Pvt Ltd.
Interest paid/provided 1.16 0.76
ICD Raised during the year 2.15 -
ICD Repaid during the year 5.74 -
Deposits (net) 6.68 7.31
Kerala Tourism Infrastructure Ltd.
Purchase of Goods & Services - 0.23
Footnote : Transaction with related party excludes, recovery of spends on their behalf.
193
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 41 : Segment Information:
The Group regards the business segment as primary segments. The business segments have been classified as follows:
• Hoteliering.
• Others – comprising of Air catering and investing activities.
The disclosures in respect of the above business segments are as under:
Capital Expenditure 251.54 280.60 90.63 154.47 342.17 435.07
Footnotes :
(i) Unallocated assets include Goodwill on consolidation, Non - Current and Current Investments, Interest receivable, Cash and Bank Balance, Deferred Tax, Assets Loans and Advances, Advance Tax and other current assets which are not directly attributable to segments
(ii) Unallocated Liabilities includes Long Term Borrowings including current maturities of long-term borrowings, deferred tax liabilities, Provision for tax, Short Term Borrowings, Premium on redemption of debenture, Interest accrued but not due, Interest accrued and due and other current liabilities which are not directly attributable to segments
(iii) Figures pertaining to subsidiaries and jointly controlled entities have been reclassified wherever necessary in order to confirm to the presentation in the consolidated financial statements.
Note 42 : Earnings Per Share (EPS) :
Earnings Per Share is calculated in accordance with Accounting Standard 20 – ‘Earnings Per Share’ - (AS-20), notified by the Company’s (Accounting Standards) Rules, 2006 (as amended).
March 31, 2014 March 31, 2013
Loss after tax – (` crores) (553.85) (430.24)
Number of Ordinary Shares 80,74,72,787 80,74,72,787
Weighted Average Number of Ordinary Shares 80,74,72,787 79,66,89,225
Face Value per Ordinary Share (`) 1 1
Earnings Per Share – (`) Basic and Diluted (6.86) (5.40)
195
Notes to Consolidated Financial Statements for the year ended March 31, 2014
Note 43 : Information of Subsidiaries in terms of section 212(8) of the Companies Act, 1956 :
The Company has opted for exemption granted vide Circular No 2/2011 related to not attaching the Balance Sheet of its subsidiaries under Section 212(8) of the Companies Act, 1956. The relevant details of Subsidiaries as at March 31, 2014 as required vide Circular No 2/2011 are as follows:
The Company has regrouped / reclassified the previous year figures to conform to the current year’s presentation.
For and on behalf of the Board
Raymond N. Bickson Managing Director
Anil P. Goel Executive Director – Finance
Abhijit Mukerji Executive Director – Hotel Operations
Beejal Desai Vice President - Legal & Company Secretary
Mumbai, May 30, 2014
197
198
WORKING RESULTS
In accordance with circular no.F.2/5/SE/76 dated February 5, 1977 issued by the Ministry of Finance,
Government of India, as amended by Ministry of Finance, Government of India through its circular dated March
8, 1977, our working results on a standalone basis for the period from April 1, 2014 to May 31, 2014 are set out
in the table below:
Particulars (` in crores)
Sales/ Turnover 273.37
Other Income 7.08
Total Income 280.45
Estimated Gross Profit/ Loss (excluding depreciation, interest and taxes) 33.36
Provision for depreciation 20.40
Provision for taxes (net) (2.36)
Estimated Net Profit/ (Loss) (3.91)
Material changes and commitments, if any, affecting our financial position
For details in relation to material changes affecting the financial position of the Company, see section “Material
Developments” on page 199.
199
MATERIAL DEVELOPMENTS
Except as stated in this Letter of Offer and as disclosed below, to our knowledge, no circumstances have arisen
since March 31, 2014 which materially and adversely affect or are likely to affect our operations, performance,
prospects or profitability, or the value of our assets or our ability to pay material liabilities.
Samsara Properties Limited, an offshore wholly owned subsidiary of the Company, has announced the execution
of a share sale deed for the divestment of 100% of its shareholding in The Blue Hotel, in Sydney, in favour of
Australia Hotels & Properties Limited (the “Buyer”). The Buyer belongs to the Jhunjhnuwala family controlled
Hind Hotels & Properties Group. Based out of Hong Kong, the Hind Group owns and operates hotels and
serviced apartments under the Ovolo brand. Subject to fulfilment of certain conditions, the transaction is
scheduled to be completed by October 31, 2014 as transfer of a “going concern”. The transaction value is A $ 32
million. The divestment is being undertaken to focus in markets which are core to Taj Group’s operations and
create liquidity to fund the Company’s short to medium term fund requirements for its ongoing expansion in
such markets.
Further, in accordance with the requirements of the Listing Agreement, the Company would be filing relevant
audited standalone and unaudited consolidated financial results for the quarter ended June 30, 2014 (the
“Quarterly Financial Results”) within 45 days of end of the quarter in terms of Clause 41 of the Listing
Agreement i.e. on or before August 15, 2014. The Quarterly Financial Results would be available on the website
of the Stock Exchanges and would be published in newspapers in accordance with the requirements of the
Listing agreement. Investors are requested to take note of the above.
200
ACCOUNTING RATIOS AND CAPITALISATION STATEMENT
The following tables present certain accounting and other ratios computed on the basis of (i) audited standalone
financial statements of the Company as at and for the year ended March 31, 2014 (the “Audited Standalone
Financial Statements”) included in the section “Financial Statements” beginning on page 95; and (ii) audited
consolidated financial statements of the Company as at and for the year ended March 31, 2014 (the “Audited
Consolidated Financial Statements”) included in the section “Financial Statements” beginning on page 147:
Accounting Ratios
Particulars Consolidated Standalone
As at and for the financial year
ended March 31, 2014(1)
As at and for the financial year
ended March 31, 2014(1)
Basic and Diluted EPS (`) (6.86) (7.31)
Return on Net-Worth (%) (2)
Not meaningful as EPS is negative Not meaningful as EPS is Negative
Net Asset Value per Equity
Share (`)
31.95 33.36
(1) Based on Audited Consolidated Financial Statements. (2) Annualised return on Net-Worth computed as (net rofit after tax for the period/ average Net-Worth for the period)*2
The ratios have been computed as below:
Ratios Computation
Return on Net
Worth (%)
Net Profit / (Loss) after tax, minority interest, share of profit of associates
Average Net Worth for the year/period
Net Asset Value per
Share
Net Worth at the end of year/period
Total number of fully paid-up Equity Shares at the end of the year/period
Net Worth paid-up equity share capital + all reserves (excluding revaluation reserves)
Standalone Capitalization Statement ` in crores
Particulars As at March 31, 2014 As adjusted for the
Issue
Equity Share Capital 80.75 80.75 Reserves and Surplus 2,613.09 2,613.09 Total Shareholders’ Funds 2,693.84 2,693.84 Long Term Borrowings (including current
maturities of long term borrowings) (excluding
redemption premium on debenture)
2,529.01 3,529.01
Short Term Borrowings 161.59 161.59 Total Debt 2,690.60 3,690.60 Long-term debt/equity ratio 0.94 1.37
201
STOCK MARKET DATA FOR EQUITY SHARES OF THE COMPANY
The Equity Shares are listed on the BSE and the NSE. The CCDs have not been listed earlier and will be listed
on the Stock Exchanges pursuant to this Issue. For further details, see section “Terms of the Issue” beginning on
page 223. We have received in-principle approvals for listing of the CCDs to be issued pursuant to this Issue
from the BSE and the NSE by letters dated April 30, 2014 and April 29, 2014, respectively.
For the purpose of this section:
Year is a calendar year;
Average price is the average of the daily closing prices of the Equity Shares for the year, or the month, as
the case may be;
High price is the maximum of the daily high prices and low price is the minimum of the daily low prices of
the Equity Shares for the year, or the month, as the case may be; and
In case of two days with the same high/low/closing price, the date with higher volume has been considered.
The high, low and average market prices of the Equity Shares recorded on the BSE and the NSE during the
preceding three years and the number of the Equity Shares traded on the days of the high and low prices were
recorded are as stated below:
BSE
Year Date of High High
(`)
Volume on date of
High
(No. of Equity
Shares)
Date of Low Low
(`)
Volume on date of
Low
(No. of Equity
Shares)
Average
(`)
2013 January 7, 2013 68.10 354,334 August 6, 2013 37.55 128,465 52.84
2012 February 17,
2012
80.00 386,102 November 12,
2012
51.30 199,554 62.58
2011 January 4, 2011 103.00 216,891 December 22,
2011
51.00 123,633 76.60
Source: www.bseindia.com
NSE
Year Date of High High
(`)
Volume on date of
High
(No. of Equity
Shares)
Date of Low Low
(`)
Volume on date of
Low
(No. of Equity
Shares)
Average
(`)
2013 January 7, 2013 68.20 1,991,383 August 6, 2013 37.50 885,463 52.86
2012 February 17,
2012
80.00 1,914,001 June 4,
2012
53.00 432,615 62.61
2011 January 4, 2011 102.80 1,262,822 December 22,
2011
50.60 449,568 76.61
Source: www.nseindia.com
Monthly high and low prices and trading volumes on the Stock Exchanges for the six months preceding the date
of filing of this Letter of Offer are as stated below:
BSE
Month Date of High High
(`)
Volume on date
of High
(No. of Equity
Shares)
Date of Low Low
(`)
Volume on date
of Low
(No. of Equity
Shares)
Average
(`)
June 2014 June 25, 2014 111.60 909,245 June 2, 2014 85.25 296,150 100.62
May 2014 May 22, 2014 92.50 494,294 May 12, 2014 68.00 135,805 79.42
April 2014 April 7, 2014 79.00 54,237 April 30, 2014 70.00 81,141 74.04
202
BSE
Month Date of High High
(`)
Volume on date
of High
(No. of Equity
Shares)
Date of Low Low
(`)
Volume on date
of Low
(No. of Equity
Shares)
Average
(`)
March 2014 March 5, 2014 74.00 141,077 March 14,
2014
67.95 57,708 70.46
February
2014
February 24,
2014
72.75 682,665 February 10,
2014
56.00 29,799 62.31
January
2014
January 1,
2014
62.95 103,649 January 30,
2014
56.00 38,282 58.71
Source: www.bseindia.com
NSE
Month Date of High High
(`)
Volume on date
of High
(No. of Equity
Shares)
Date of Low Low
(`)
Volume on date
of Low
(No. of Equity
Shares)
Average
(`)
June 2014 June 26, 2014 112.00 1,385,715 June 2, 2014 84.50 16,68,092 100.72
May 2014 May 22, 2014 93.00 1,773,193 May 12, 2014 68.00 473,736 79.50
April 2014 April 16, 2014 77.30 601,966 April 30, 2014 70.45 344,115 74.09
March 2014 March 5, 2014 74.00 784,471 March 14,
2014
67.50 381,998 70.54
February
2014
February 24,
2014
72.70 2,649,724 February 4 ,
2014
56.00 134,879 62.42
January
2014
January 1,
2014
62.90 431,805 January 30,
2014
56.10 332,569 58.75
Source: www.nseindia.com
Week end prices of Equity Shares along with the highest and lowest closing prices on the Stock Exchanges for
the last four weeks preceding the date of filing of this Letter of Offer is as stated below:
BSE
For the week ended on Closing Price (`) High (`) Low (`)
July 4, 2014 107.05 109.85 100.00
June 27, 2014 102.55 108.60 98.10
June 20, 2014 100.00 103.20 97.10
June 13, 2014 102.90 104.80 94.80
Source: www.bseindia.com
NSE
For the week ended on Closing Price (`) High (`) Low (`)
July 4, 2014 107.00 109.80 100.00
June 27, 2014 102.30 112.00 98.55
June 20, 2014 99.60 103.35 97.00
June 13, 2014 103.00 104.85 94.95
Source: www.nseindia.com
The closing market price of the Equity Shares of our Company as on one day prior to the date of the Letter of
Offer was ` 103.90 on the BSE and ` 104.00 on the NSE.
The Issue Price and Conversion Price of ` 55 and ` 55 per CCD, respectively, has been arrived at in consultation
between the Company and the Lead Managers. The CCDs will compulsorily and automatically convert into the
Equity Shares without any further act or payment on part of the CCD holders in accordance with the terms of the
CCDs. The Issue Price payable at the time of subscription of the CCDs will include the conversion price at
which the Equity Shares will be issued and allotted upon conversion of the CCDs.
The Issue has been authorised by a resolution of the Board of Directors of the Company passed at their meeting
held on March 27, 2014, pursuant to Section 81 of the Companies Act, 1956 and Section 62 of the Companies
Act, 2013, to the extent applicable. The Issue Price of ` 55 for each CCD has been arrived at in consultation
with the Lead Managers.
The Company has received in-principle approvals from the BSE and the NSE for listing of the CCDs to be
allotted in the Issue pursuant to letters dated April 30, 2014 and April 29, 2014, respectively.
RBI Letter with respect to renunciation
The RBI has, pursuant to a letter dated July 4, 2014 (the “RBI Letter”), has conveyed its no-objection to
renunciation of rights entitlement of the CCDs of the Company by the following:
(i) non-resident Shareholder in favour of a resident investor on the floor of the Stock Exchanges;
(ii) non-resident Shareholder in favour of a non-resident investor on the floor of the Stock Exchanges. However,
the offer price to non-resident investor should not be less than that at which offer is made to resident
Shareholder. If the non-resident transferees include FIIs, the individual as well as overall limit should be
complied with;
(iii) resident Shareholder to non-resident investor is akin to transfer by way of sale. The offer price to non-
resident investor should not be less than that at which the offer is made to a resident Shareholder in terms of
Regulation 6 of Notification No. FEMA 20/2000-RB dated May 3, 2000 as amended from time to time. Further,
the renunciation of rights entitlement should be on the floor of the Stock Exchange;
subject to the condition that (a) the Company complied with all the documentation and reporting requirements;
(b) if any transaction involves an erstwhile OCB, the bank should approach with full details for prior approval;
(c) the NRI Shareholders holding non-repartiable Equity Shares may renounce the rights entitlement in favour of
residents or other NRIs only; and (d) issuance of the CCDs is in strict compliance of the extant FEMA
provisions; (e) in terms of Regulation 6 of Notification No. FEMA 20/2000-RB dated May 3, 2000 as amended
from time to time, only the existing non-resident Shareholders may subscribe for additional CCDs over and
above the CCDs offered on the rights basis by the Company.
Prohibition by SEBI or Other Governmental Authorities
The Company, the Promoter, the members of the Promoter Group, the Directors and the persons in control of the
Company, persons in control of Promoter have not been prohibited from accessing or operating the capital
market or restrained from buying, selling or dealing in securities under any order or direction passed by SEBI or
any other regulatory or governmental authority.
The companies with which the Promoter, the Directors or the persons in control of the Company are or were
associated as promoter, directors or persons in control have not been debarred from accessing the capital market
under any order or direction passed by SEBI or any other regulatory or governmental authority.
Other than those disclosed in the section “Outstanding Litigation and Defaults - Action initiated by SEBI against
the Entities operating in the Securities Market with which Directors are associated” on page 210, no action has
been initiated by SEBI against the entities operating in the securities market with which the Directors are
associated.
Prohibition by RBI
None of the Company, the Promoter, the members of the Promoter Group or the Group Companies have been
identified as wilful defaulters by the RBI or any other governmental authority.
Eligibility for the Issue
215
The Company is a listed company and has been incorporated under the Indian Companies Act, 1882. The CCDs
of the Company are not listed on the Stock Exchanges and the Equity Shares of the Company are presently listed
on the Stock Exchanges. It is eligible to offer this issue in terms of Chapter IV of the SEBI Regulations.
Compliance with Regulation 4(2) of the SEBI Regulations
Our Company is in compliance with the conditions specified in Regulation 4(2) of the SEBI Regulations, to the
extent applicable. Further, in relation to compliance with Regulation 4(2)(d) of the SEBI Regulations, Company
undertakes to make an application to the Stock Exchanges for listing of the CCDs to be issued pursuant to this
Issue. The Company has chosen the BSE as the Designated Stock Exchange for the Issue.
Compliance with Part E of Schedule VIII of the SEBI Regulations
The Company is in compliance with the provisions specified in Clause (1) of Part E of Schedule VIII of the
SEBI Regulations as explained below:
(a) The Company has been filing periodic reports, statements and information in compliance with the
listing agreement for the last three years immediately preceding the date of filing of the Draft Letter of
Offer with SEBI.
(b) The reports, statements and information referred to in sub-clause (a) above are available on the website
of the BSE and the NSE or on a common e-filing platform specified by SEBI.
(c) The Company has an investor grievance-handling mechanism which includes meeting of the
Shareholders/Investors’ Grievance Committee at frequent intervals, appropriate delegation of power by
the Board of Directors of the Company as regards share transfer and clearly laid down systems and
procedures for timely and satisfactory redressal of investor grievances.
As the Company satisfies the conditions specified in Clause (1) of Part E of Schedule VIII of SEBI Regulations,
disclosures in this Letter of Offer have been made in terms of Clause (5) of Part E of Schedule VIII of the SEBI
Regulations.
DISCLAIMER CLAUSE OF SEBI
AS REQUIRED, A COPY OF THE DRAFT LETTER OF OFFER HAS BEEN SUBMITTED TO SEBI.
IT IS TO BE DISTINCTLY UNDERSTOOD THAT THE SUBMISSION OF THE DRAFT LETTER OF
OFFER TO SEBI SHOULD NOT, IN ANY WAY BE DEEMED OR CONSTRUED THAT THE SAME
HAS BEEN CLEARED OR APPROVED BY SEBI. SEBI DOES NOT TAKE ANY RESPONSIBILITY
EITHER FOR THE FINANCIAL SOUNDNESS OF ANY SCHEME OR THE PROJECT FOR WHICH
THE ISSUE IS PROPOSED TO BE MADE, OR FOR THE CORRECTNESS OF THE STATEMENTS
MADE OR OPINIONS EXPRESSED IN THE DRAFT LETTER OF OFFER. THE LEAD MANAGERS,
JM FINANCIAL INSTITUTIONAL SECURITIES LIMITED, DSP MERRILL LYNCH LIMITED, SBI
CAPITAL MARKETS LIMITED AND STANDARD CHARTERED SECURITIES (INDIA) LIMITED,
HAVE CERTIFIED THAT THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE
GENERALLY ADEQUATE AND ARE IN CONFORMITY WITH SEBI (ISSUE OF CAPITAL AND
DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 IN FORCE FOR THE TIME BEING. THIS
REQUIREMENT IS TO FACILITATE INVESTORS TO TAKE AN INFORMED DECISION FOR
MAKING INVESTMENT IN THE PROPOSED ISSUE.
IT SHOULD ALSO BE CLEARLY UNDERSTOOD THAT WHILE THE ISSUER IS PRIMARILY
RESPONSIBLE FOR THE CORRECTNESS, ADEQUACY AND DISCLOSURE OF ALL RELEVANT
INFORMATION IN THE DRAFT LETTER OF OFFER, THE LEAD MANAGERS ARE EXPECTED
TO EXERCISE DUE DILIGENCE TO ENSURE THAT THE ISSUER DISCHARGES ITS
RESPONSIBILITY ADEQUATELY IN THIS BEHALF AND TOWARDS THIS PURPOSE LEAD
MANAGERS, JM FINANCIAL INSTITUTIONAL SECURITIES LIMITED, DSP MERRILL LYNCH
LIMITED, SBI CAPITAL MARKETS LIMITED AND STANDARD CHARTERED SECURITIES
(INDIA) LIMITED, HAVE FURNISHED TO SEBI A DUE DILIGENCE CERTIFICATE DATED
APRIL 15, 2014 WHICH READS AS FOLLOWS:
(1) WE HAVE EXAMINED VARIOUS DOCUMENTS INCLUDING THOSE RELATING TO
LITIGATION LIKE COMMERCIAL DISPUTES, PATENT DISPUTES, DISPUTES WITH
COLLABORATORS, ETC. AND OTHER MATERIAL IN CONNECTION WITH THE
216
FINALISATION OF THE DRAFT LETTER OF OFFER PERTAINING TO THE ISSUE;
(2) ON THE BASIS OF SUCH EXAMINATION AND THE DISCUSSIONS WITH THE
COMPANY, ITS DIRECTORS AND OTHER OFFICERS, OTHER AGENCIES, AND
INDEPENDENT VERIFICATION OF THE STATEMENTS CONCERNING THE OBJECTS
OF THE ISSUE, PRICE JUSTIFICATION AND THE CONTENTS OF THE DOCUMENTS
AND OTHER PAPERS FURNISHED BY THE COMPANY, WE CONFIRM THAT:
(a) THE DRAFT LETTER OF OFFER FILED WITH SEBI IS IN CONFORMITY WITH
THE DOCUMENTS, MATERIALS AND PAPERS RELEVANT TO THE ISSUE;
(b) ALL THE LEGAL REQUIREMENTS RELATING TO THE ISSUE AS ALSO THE
REGULATIONS, GUIDELINES, INSTRUCTIONS, ETC. FRAMED/ISSUED BY SEBI,
THE GOVERNMENT OF INDIA AND ANY OTHER COMPETENT AUTHORITY IN
THIS BEHALF HAVE BEEN DULY COMPLIED WITH; AND
(c) THE DISCLOSURES MADE IN THE DRAFT LETTER OF OFFER ARE TRUE, FAIR
AND ADEQUATE TO ENABLE THE INVESTORS TO MAKE A WELL INFORMED
DECISION AS TO THE INVESTMENT IN THE PROPOSED ISSUE AND SUCH
DISCLOSURES ARE IN ACCORDANCE WITH THE REQUIREMENTS OF THE
COMPANIES ACT, 1956, AND THE COMPANIES ACT, 2013, TO THE EXTENT
APPLICABLE, SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF
CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 AND
OTHER APPLICABLE LEGAL REQUIREMENTS.
(3) WE CONFIRM THAT BESIDES OURSELVES, ALL THE INTERMEDIARIES NAMED IN
THE DRAFT LETTER OF OFFER ARE REGISTERED WITH SEBI AND THAT TILL DATE
SUCH REGISTRATION IS VALID.
(4) WE HAVE SATISFIED OURSELVES ABOUT THE CAPABILITY OF THE
UNDERWRITERS TO FULFIL THEIR UNDERWRITING COMMITMENTS – NOT
APPLICABLE.
(5) WE CERTIFY THAT WRITTEN CONSENT FROM PROMOTER HAS BEEN OBTAINED
FOR INCLUSION OF ITS SPECIFIED SECURITIES AS PART OF PROMOTER’S
CONTRIBUTION SUBJECT TO LOCK-IN AND THE SPECIFIED SECURITIES PROPOSED
TO FORM PART OF PROMOTER’S CONTRIBUTION SUBJECT TO LOCK-IN SHALL
NOT BE DISPOSED / SOLD / TRANSFERRED BY THE PROMOTER DURING THE
PERIOD STARTING FROM THE DATE OF FILING THE DRAFT LETTER OF OFFER
WITH SEBI TILL THE DATE OF COMMENCEMENT OF LOCK-IN PERIOD AS STATED
IN THE DRAFT LETTER OF OFFER – NOT APPLICABLE
(6) WE CERTIFY THAT REGULATION 33 OF THE SECURITIES AND EXCHANGE BOARD
OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS,
2009, WHICH RELATES TO SPECIFIED SECURITIES INELIGIBLE FOR COMPUTATION
OF PROMOTERS CONTRIBUTION, HAS BEEN DULY COMPLIED WITH AND
APPROPRIATE DISCLOSURES AS TO COMPLIANCE WITH THE SAID REGULATION
HAVE BEEN MADE IN THE DRAFT LETTER OF OFFER – NOT APPLICABLE
(7) WE UNDERTAKE THAT SUB-REGULATION (4) OF REGULATION 32 AND CLAUSE (C)
AND (D) OF SUB-REGULATION (2) OF REGULATION 8 OF THE SECURITIES AND
EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND DISCLOSURE
REQUIREMENTS) REGULATIONS, 2009 SHALL BE COMPLIED WITH. WE CONFIRM
THAT ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’
CONTRIBUTION SHALL BE RECEIVED AT LEAST ONE DAY BEFORE THE OPENING
OF THE ISSUE. WE UNDERTAKE THAT AUDITORS’ CERTIFICATE TO THIS EFFECT
SHALL BE DULY SUBMITTED TO SEBI. WE FURTHER CONFIRM THAT
ARRANGEMENTS HAVE BEEN MADE TO ENSURE THAT PROMOTERS’
CONTRIBUTION SHALL BE KEPT IN AN ESCROW ACCOUNT WITH A SCHEDULED
COMMERCIAL BANK AND SHALL BE RELEASED TO THE COMPANY ALONG WITH
THE PROCEEDS OF THE ISSUE – NOT APPLICABLE
217
(8) WE CERTIFY THAT THE PROPOSED ACTIVITIES OF THE COMPANY FOR WHICH
THE FUNDS ARE BEING RAISED IN THE PRESENT ISSUE FALL WITHIN THE ‘MAIN
OBJECTS’ LISTED IN THE OBJECT CLAUSE OF THE MEMORANDUM OF
ASSOCIATION OR OTHER CHARTER OF THE COMPANY AND THAT THE ACTIVITIES
WHICH HAVE BEEN CARRIED OUT UNTIL NOW ARE VALID IN TERMS OF THE
OBJECT CLAUSE OF ITS MEMORANDUM OF ASSOCIATION.
(9) WE CONFIRM THAT NECESSARY ARRANGEMENTS HAVE BEEN MADE TO ENSURE
THAT THE MONEYS RECEIVED PURSUANT TO THE ISSUE ARE KEPT IN A SEPARATE
BANK ACCOUNT AS PER THE PROVISIONS OF SUB-SECTION (3) OF SECTION 40 OF
THE COMPANIES ACT, 2013 AND THAT SUCH MONEYS SHALL BE RELEASED BY THE
SAID BANK ONLY AFTER PERMISSION IS OBTAINED FROM ALL THE STOCK
EXCHANGES MENTIONED IN THE DRAFT LETTER OF OFFER. WE FURTHER
CONFIRM THAT THE AGREEMENT ENTERED INTO BETWEEN THE BANKERS TO
THE ISSUE AND THE COMPANY SPECIFICALLY CONTAINS THIS CONDITION - NOT
APPLICABLE FOR A RIGHTS ISSUE. TRANSFER OF MONIES RECEIVED PURSUANT
TO THE ISSUE SHALL BE RELEASED TO THE COMPANY AFTER FINALISATION OF
THE BASIS OF ALLOTMENT IN COMPLIANCE WITH REGULATION 56 OF THE SEBI
REGULATIONS.
(10) WE CERTIFY THAT A DISCLOSURE HAS BEEN MADE IN THE DRAFT LETTER OF
OFFER THAT THE INVESTORS SHALL BE GIVEN AN OPTION TO GET THE CCDs AND
THE EQUITY SHARES, UPON CONVERSION, IN DEMAT OR PHYSICAL MODE.
(11) WE CERTIFY THAT ALL THE APPLICABLE DISCLOSURES MANDATED IN THE
SECURITIES AND EXCHANGE BOARD OF INDIA (ISSUE OF CAPITAL AND
DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 HAVE BEEN MADE IN ADDITION
TO DISCLOSURES WHICH, IN OUR VIEW, ARE FAIR AND ADEQUATE TO ENABLE
THE INVESTOR TO MAKE A WELL INFORMED DECISION.
(12) WE CERTIFY THAT THE FOLLOWING DISCLOSURES HAVE BEEN MADE IN THE
DRAFT LETTER OF OFFER:
(a) AN UNDERTAKING FROM THE COMPANY THAT AT ANY GIVEN TIME, THERE
SHALL BE ONLY ONE DENOMINATION FOR THE EQUITY SHARES OF THE
COMPANY AND
(b) AN UNDERTAKING FROM THE COMPANY THAT IT SHALL COMPLY WITH
SUCH DISCLOSURE AND ACCOUNTING NORMS SPECIFIED BY SEBI FROM
TIME TO TIME.
(13) WE UNDERTAKE TO COMPLY WITH THE REGULATIONS PERTAINING TO
ADVERTISEMENT IN TERMS OF THE SECURITIES AND EXCHANGE BOARD OF INDIA
(ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009 WHILE
MAKING THE ISSUE – NOTED FOR COMPLIANCE.
(14) WE ENCLOSE A NOTE EXPLAINING HOW THE PROCESS OF DUE DILIGENCE HAS
BEEN EXERCISED BY US IN VIEW OF THE NATURE OF CURRENT BUSINESS
BACKGROUND OR THE ISSUER, SITUATION AT WHICH THE PROPOSED BUSINESS
STANDS, THE RISK FACTORS, PROMOTERS EXPERIENCE, ETC.
(15) WE ENCLOSE A CHECKLIST CONFIRMING REGULATION-WISE COMPLIANCE WITH
THE APPLICABLE PROVISIONS OF THE SECURITIES AND EXCHANGE BOARD OF
INDIA (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) REGULATIONS, 2009,
CONTAINING DETAILS SUCH AS THE REGULATION NUMBER, ITS TEXT, THE
STATUS OF COMPLIANCE, PAGE NUMBER OF THE DRAFT LETTER OF OFFER
WHERE THE REGULATION HAS BEEN COMPLIED WITH AND OUR COMMENTS, IF
ANY.
(16) WE ENCLOSE STATEMENT ON ‘PRICE INFORMATION OF PAST ISSUES HANDLED BY
LEAD MANAGERS BELOW (WHO ARE RESPONSIBLE FOR PRICING THIS ISSUE)’, AS
218
PER FORMAT SPECIFIED BY SEBI THROUGH CIRCULAR DATED SEPTEMBER 27,
2011. NOT APPLICABLE
(17) WE CERTIFY THAT PROFITS FROM RELATED PARTY TRANSACTIONS HAVE ARISEN
FROM LEGITIMATE BUSINESS TRANSACTIONS. – COMPLIED WITH TO THE EXTENT
OF THE RELATED PARTY TRANSACTIONS REPORTED, IN ACCORDANCE WITH
ACCOUNTING STANDARD 18, IN THE FINANCIAL STATEMENTS OF THE COMPANY
INCLUDED IN THE DRAFT LETTER OF OFFER.
THE FILING OF THE DRAFT LETTER OF OFFER DOES NOT, HOWEVER, ABSOLVE THE COMPANY
FROM ANY LIABILITIES UNDER SECTION 34 OR SECTION 36 OF THE COMPANIES ACT, 2013 OR
FROM THE REQUIREMENT OF OBTAINING SUCH STATUTORY OR OTHER CLEARANCE AS MAY
BE REQUIRED FOR THE PURPOSE OF THE PROPOSED ISSUE. SEBI FURTHER RESERVES THE
RIGHT TO TAKE UP, AT ANY POINT OF TIME, WITH THE LEAD MANAGERS ANY
IRREGULARITIES OR LAPSES IN THE DRAFT LETTER OF OFFER.
Disclaimer clauses from the Company and the Lead Managers
The Company and the Lead Managers accept no responsibility for statements made otherwise than in this Letter
of Offer or in any advertisement or other material issued by the Company or by any other persons at the instance
of the Company and anyone placing reliance on any other source of information would be doing so at his own
risk.
Investors who invest in the Issue will be deemed to have represented to the Company, the Lead Managers and
their respective directors, officers, agents, affiliates and representatives that they are eligible under all applicable
laws, rules, regulations, guidelines and approvals to acquire CCDs, and are relying on independent advice /
evaluation as to their ability and quantum of investment in the Issue.
CAUTION
The Company and the Lead Managers shall make all information available to the Eligible Equity Shareholders
and no selective or additional information would be available for a section of the Eligible Equity Shareholders in
any manner whatsoever including at presentations, in research or sales reports etc. after filing of this Letter of
Offer.
No dealer, salesperson or other person is authorized to give any information or to represent anything not
contained in this Letter of Offer. You must not rely on any unauthorized information or representations. This
Letter of Offer is an offer to sell only the CCDs and rights to purchase the CCDs offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information contained in this Letter of Offer is
current only as of its date.
Disclaimer with respect to jurisdiction
This Letter of Offer has been prepared under the provisions of Indian laws and the applicable rules and
regulations thereunder. Any disputes arising out of the Issue will be subject to the jurisdiction of the appropriate
court(s) in Mumbai, India only.
Designated Stock Exchange
The Designated Stock Exchange for the purpose of the Issue is BSE.
Disclaimer Clause of the BSE
As required, a copy of the Draft Letter of Offer has been submitted to the BSE. The Disclaimer Clause as
intimated by the BSE to us, post scrutiny of the Draft Letter of Offer is as under:
“BSE Limited (“the Exchange”) has given vide its letter dated April 30, 2014 permission to this Company to use
the Exchange’s name in this Letter of Offer as one of the stock exchanges on which this Company’s securities
are proposed to be listed. The Exchange has scrutinized this letter of offer for its limited internal purpose of
deciding on the matter of granting the aforesaid permission to this Company. The Exchange does not in any
manner:
219
i. warrant, certify or endorse the correctness or completeness of any of the contents of this letter of offer;
or
ii. warrant that this Company’s securities will be listed or will continue to be listed on the Exchange; or
iii. take any responsibility for the financial or other soundness of this Company, its promoters, its
management or any scheme or project of this Company;
and it should not for any reason be deemed or construed that this letter of offer has been cleared or
approved by the Exchange. Every person who desires to apply for or otherwise acquires any securities
of this Company may do so pursuant to independent inquiry, investigation and analysis and shall not
have any claim against the Exchange whatsoever by reason of any loss which may be suffered by such
person consequent to or in connection with such subscription / acquisition whether by reason of
anything stated or omitted to be stated herein or for any other reason whatsoever.
Disclaimer Clause of the NSE
As required, a copy of the Draft Letter of Offer has been submitted to the NSE. The Disclaimer Clause as
intimated by the NSE to us, post scrutiny of the Draft Letter of Offer is as under:
“As required, a copy of this letter of offer has been submitted to National Stock Exchange of India Limited
(hereinafter referred to as NSE). NSE has given vide its letter Ref. No. NSE/LIST/237220-8 dated April 29,
2014 permission to the Issuer to use the Exchange’s name in this letter of offer as on of the stock exchanges on
which this Issuer’s securities are proposed to be listed. The Exchange has scrutinized this letter of offer for its
limited internal purpose of deciding on the matter of granting the aforesaid permission to this Issuer. It is to be
distinctly understood that the aforesaid permission given by NSE should not in any way be deemed or construed
that the letter of offer has been cleared or approved by NSE; nor does it in any manner, warrant, certify or
endorse the correctness or completeness of any of the contents of this letter of offer; nor does it warrant that this
Issuer’s securities will be listed or will continue to be listed on the Exchange; nor does it take any responsibility
for the financial or other soundness of this Issuer, its promoters, its management or any scheme or project of this
Issuer.
Every person who desires to apply for or otherwise acquire any securities of this Issuer may do so pursuant to
independent inquiry, investigation and analysis and shall not have any claim against the Exchange whatsoever
by reason of any loss which may be suffered by such person consequent to or in connection with such
subscription / acquisition whether by reason of anything stated or omitted to be stated herein or any other reason
whatsoever.”
Selling Restrictions
The distribution of this Letter of Offer and the issue of CCDs on a rights basis to persons in certain jurisdictions
outside India is restricted by legal requirements prevailing in those jurisdictions. Persons into whose possession
this Letter of Offer may come are required to inform themselves about and observe such restrictions. The
Company is making this Issue on a rights basis to the Eligible Equity Shareholders of the Company and will
dispatch this Letter of Offer/ Abridged Letter of Offer and CAF only to Eligible Equity Shareholders who have
provided an Indian address to the Company. No action has been or will be taken to permit the Issue in any
jurisdiction, or the possession, circulation, or distribution of this Letter of Offer or any other material relating to
the Company, the CCDs or Rights Entitlement in any jurisdiction, where action would be required for that
purpose, except that this Letter of Offer has been filed with SEBI.
Accordingly, the CCDs and Rights Entitlement may not be offered or sold, directly or indirectly, and none of the
Letter of Offer or any offering materials or advertisements in connection with the CCDs or Rights Entitlement
may be distributed or published in any jurisdiction, except in accordance with legal requirements applicable in
such jurisdiction. Receipt of this Letter of Offer will not constitute an offer in those jurisdictions in which it
would be illegal to make such an offer.
This Letter of Offer and its accompanying documents are being supplied to you solely for your
information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other
person or published, in whole or in part, for any purpose.
If this Letter of Offer is received by any person in any jurisdiction where to do so would or might contravene
220
local securities laws or regulation, or by their agent or nominee, they must not seek to subscribe to the CCDs or
the Rights Entitlement referred to in this Letter of Offer. Investors are advised to consult their legal counsel prior
to applying for the Rights Entitlement and CCDs or accepting any provisional allotment of CCDs, or making
any offer, sale, resale, pledge or other transfer of the CCDs or Rights Entitlement.
Neither the delivery of this Letter of Offer nor any sale hereunder, shall under any circumstances create any
implication that there has been no change in the Company’s affairs from the date hereof or the date of such
information or that the information contained herein is correct as of any time subsequent to this date or the date
of such information.
Each person who exercises Rights Entitlement and subscribes for CCDs or excess CCDs, or who purchases
Rights Entitlement or CCDs shall do so in accordance with the restrictions set out below.
NO OFFER IN THE UNITED STATES
THE RIGHTS ENTITLEMENTS AND THE CCDS HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “US SECURITIES
ACT”), OR ANY U.S. STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, RESOLD OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES, EXCEPT IN A TRANSACTION EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE RIGHTS
ENTITLEMENTS AND CCDS REFERRED TO IN THIS LETTER OF OFFER ARE BEING OFFERED IN
INDIA, BUT NOT IN THE UNITED STATES. THE OFFERING TO WHICH THIS LETTER OF OFFER
RELATES IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE CONSTRUED AS, AN OFFERING OF
ANY CCDS OR RIGHTS ENTITLEMENTS FOR SALE IN THE UNITED STATES OR AS A
SOLICITATION THEREIN OF AN OFFER TO BUY ANY OF THE SAID SECURITIES. ACCORDINGLY,
THIS LETTER OF OFFER SHOULD NOT BE FORWARDED TO OR TRANSMITTED IN OR INTO THE
UNITED STATES AT ANY TIME.
Filing
The Draft Letter of Offer was filed with the Corporation Finance Department of SEBI, located at SEBI Bhavan,
C-4-A, G Block, Bandra-Kurla Complex, Bandra (East), Mumbai 400 051, India for its observations. Pursuant to
receipt of SEBI’s observations, this Letter of Offer is being filed with the Designated Stock Exchange as per the
provisions of the Companies Act.
Issue Related Expenses
The expenses of the Issue payable by the Company include brokerage, fees and reimbursement to the Lead
Managers, Legal Advisor to the Issue, Registrar, printing and distribution expenses, publicity, listing fees, stamp
duty and other expenses and will be met out of the Issue Proceeds.
S.
No.
Particulars Amounts
(` in crores)
Percentage of
Total Estimated
Issue Expenditure
Percentage of
Issue Size
8. 1. Fees of the Lead Managers 2.42 35.78 0.24
9. 2. Fees to the legal advisor, other
professional service providers and
statutory fees
2.36 34.97 0.24
10. 3. Fees of Registrar to the Issue 0.08 1.22 0.01
11. 4. Fees of Debenture Trustees 0.02 0.25 0.00
12. 5. Advertising and marketing expenses 0.03 0.44 0.00
13. 6. Printing and stationery, distribution,
postage etc.
1.35 19.94 0.13
14. 7. Other expenses (including miscellaneous
expenses and stamp duty)
0.50 7.40 0.05
Total estimated Issue related expenses* 6.75 100.00 0.68 *Company may incur additional expenditure upon conversion of the CCDs into the Equity Shares. Accordingly, such expenditure has not been included in the Issue related expenses at this stage and it will be adjusted against the Issue Proceeds on or after the Conversion Date.
Investor Grievances and Redressal System
221
The Company has adequate arrangements for the redressal of investor complaints in compliance with the
corporate governance requirements under the Listing Agreement.
The Company has a Stakeholders’ Relationship Committee which comprised of Jagdish Capoor (Chairman),
Raymond N. Bickson and Abhijit Mukerji. However, upon retirement of Jagdish Capoor from the Board with
effect from July 1, 2014 in accordance with the Tata Group Policy on Retirement Age of Directors, the
Company is in the process of re-constituting its Stakeholders’ Relationship Committee. The broad terms of
reference include redressal of shareholders’ and investors’ complaints relating to transfer of shares, non-receipt
of Annual Reports, non-receipt of dividends, etc. We have been registered with the SEBI Complaints Redress
System (SCORES) as required by the SEBI Circular no. CIR/ OIAE/ 2/ 2011 dated June 3, 2011. Consequently,
investor grievances are tracked online by the Company.
The Investor complaints received by the Company are disposed off within 15 days from the date of receipt of the
complaint.
Status of outstanding investor complaints in relation to the Company
As on the date of this Letter of Offer, there were no outstanding investor complaints.
Investor Grievances arising out of the Issue
The Company’s investor grievances arising out of the Issue will be handled by Link Intime India Private
Limited, the Registrar to the Issue. The Registrar will have a separate team of personnel handling only post-Issue
correspondence.
The agreement between the Company and the Registrar will provide for retention of records with the Registrar
for a period of at least one year from the last date of dispatch of Allotment Advice/ CCD certificate / demat
credit/ refund order to enable the Registrar to redress grievances of Investors.
All grievances relating to the Issue may be addressed to the Registrar or the SCSB in case of ASBA Applicants
giving full details such as folio no., name and address, contact telephone / cell numbers, e-mail id of the first
Applicant, number and type of CCDs applied for, CAF serial number, amount paid on application and the name
of the bank and the branch where the application was deposited, along with a photocopy of the
acknowledgement slip. In case of renunciation, the same details of the Renouncee should be furnished.
The average time taken by the Registrar for attending to routine grievances will be seven to 10 days from the
date of receipt of complaints. In case of non-routine grievances where verification at other agencies is involved,
it would be the endeavour of the Registrar to attend to them as expeditiously as possible. The Company
undertakes to resolve the investor grievances in a time bound manner.
